Question

Beef is a normal good. You observe that both the equilibrium price and quantity of beef have fallen over time. Which of the following explanations would be most consistent with this observation?
A. Consumers have experienced an increase in income, and beef-production technology has improved.
B. The price of chicken has risen, and the price of steak sauce has fallen.
C. New medical evidence has been released that indicates a negative correlation between a person’s beef consumption and life expectancy.
D. The demand curve for beef must be positively sloped.

Answer 1

Answer:

C. New medical evidence has been released that indicates a negative correlation between a person’s beef

Explanation:

The demand for a normal good reacts to price changes as per the law of demand. A reduction in price results in an increased demand for the normal good. If the consumer's income increase, the demand rises.  Normal goods are contrasted by inferior goods whose demand reduces with an increase in consumer's income.

A reduction in equilibrium price and quantity for beef could be caused by an increase in the price of beef, reduced incomes, or negative news concerning beef in the market. From the option available, the news concerning the correlation between life expectancy and beef consumption is most likely to affect demand.  As a normal good, the demand for beef will decrease because consumers will consider it a low-quality product.