Suppose that a decrease in the price of feed grain leads to a dramatic decrease in the price of beef.Use the income effect and the substitution effect to explain why there was an increase in the quantity of beef purchased.

Question

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The Answer is The income effect predicts that the quantity of beef purchased will rise when beef prices fall because people will now be able to afford more.The purchasing power of their income rises when prices fall, assuming other things remain the same.
The substitution effect predicts that the lower price of beef will lead consumers of substitute foods such as chicken and pork to buy more of the relatively less expensive beef and to buy less chicken or pork or other beef substitutes whose prices have not fallen.

Suppose That a Decrease in the Price of Feed Grain