Assume that Figure 4-16 shows the supply of steak. An increase in the price of cattle feed will change the supply from A) S ₁ to S ₂ . B) S ₂ to S ₁ . C) S ₂ to S ₃ . D) S ₁ to S ₃ .

Question

Quizplus · Accepted Answer

An increase in the price of cattle feed will increase the cost of producing beef and, as a result, decrease the profit margins of beef producers. This will lead to a decrease in supply, causing a shift from S1 to S2. The initial equilibrium point will move from U1 to U2, resulting in a higher equilibrium price and a lower equilibrium quantity. Thus, the supply curve will shift from S1U1B1 to S2U2B1, resulting in a decrease in the quantity supplied and an increase in the price.

Assume That Figure 4-16 Shows the Supply of Steak