Question

4. In the late 1990s and through 2000, the British public became increasingly concerned about " Mad Cow Disease," which could be deadly to humans if they ate beef from these cattle. Fearing the disease, many consumers switched to other meats, like chicken, pork, or lamb. At the same time, the British government ordered the destruction of thousands of head of cattle. Illustrate the effects of these events on the equilibrium price and quantity in the market for British beef. Can we determine with certainty the direction of change for the quantity? For the price? Explain briefly.

Answer 1

Answer:

The quantity is likely to decrease, the change in price depends on the extent of change in demand and supply.

Explanation:

The fear of the mad cow disease lead to a reduction in the demand for beef. This caused the demand curve to move to the left.

At the same time, destruction of cattle heads ordered by the government lead to a reduction in the supply of beef. This caused the supply curve to move to the left.

This leftward shift in both demand as well as supply curve will lead to a reduction in the equilibrium quantity of beef.

The change in price of beef depends upon the extent of change in demand and supply. If both decrease by the same extent, the price will remain the same.