Suppose the market for beef cattle was initially in equilibrium.What will be the effect of an increase in the price of the feed grains used to fatten cattle?

Question

Quizplus · Accepted Answer

An increase in the price of feed grains will increase the cost of raising cattle for beef production. As a result, some cattle farmers may choose to reduce their supply of beef cattle or even exit the market in the long run, leading to a decrease in the supply of beef cattle. This decrease in supply will eventually cause the price of beef to rise in order to reach a new equilibrium between supply and demand. The demand for beef cattle may initially increase as consumers switch to other meats, but in the long run, the higher price of beef may lead some consumers to reduce their demand for beef, placing downward pressure on the price. However, the effect on demand will likely be smaller than the effect on supply, making B the best answer.

Suppose the Market for Beef Cattle Was Initially in Equilibrium