Question

Beef is a normal good. You observe that both the equilibrium price and quantity of beef have fallen over time.

Answer 1

Answer:

d. Consumers have experienced an increase in income, and beef-production technology has improved.

Explanation:

Beef is a normal good. You observe that both the equilibrium price and quantity of beef have fallen over time.

The most likely economic explanation that would be most consistent with this observation is that Consumers have experienced an increase in income, and beef-production technology has improved.

Firstly, in relation to increase in income, as income increases certain normal goods are less demanded making them inferior goods. Hence both the equilibrium price and quantity of beef or any such product will fall over time.

In the case of beef, because of health considerations, consumers will stay away from it as their income increases because they will seek for healthier options like fish which they may not have been able to afford before.

Secondly, in relation to improved beef-production technology, beef supply will definitely increase with such improved technology, implying that supply will outweigh demand and the natural reaction will be a fall in equilibrium price.