Assume that the graphs show a competitive market for the product stated in the question. Select the graph above that best shows the change in the market specified in the following situation: In the market for chicken, when the price of a substitute, such as beef, decreases.

Question

Assume that the graphs show a competitive market for the product stated in the question.   Select the graph above that best shows the change in the market specified in the following situation: In the market for chicken, when the price of a substitute, such as beef, decreases.

Quizplus · Accepted Answer

In a competitive market, a decrease in the price of a substitute product (beef) would lead to a decrease in demand for the product (chicken), as consumers would switch to the substitute. This would shift the demand curve for chicken to the left. Graph B shows this shift in demand, with the demand curve shifting from D1 to D2 and the equilibrium price and quantity both decreasing.

Assume That the Graphs Show a Competitive Market for the Product