Question

Suppose that chicken breasts and beef steaks are demand substitutes and are traded in competitive markets. Suppose also that there was a reduction in the supply of chicken breasts due to a reduction in poultry from disease.

A. The equilibrium quantity of chicken should increase.

B. The equilibrium price of beef steaks should increase

C. The equilibrium price of beef steaks should decrease.

D. The equilibrium price of chicken should decrease.

E. None of the above.

Answer 1

Answer
The decrease in the supply of chicken breasts shifts the supply curve to left and decreases the quantity and increases the price for it.
Also, the increased price increases the demand for beef steak as it is a substitute good so the people switch between these as price increases.
The increased demand for steaks shifts steaks demand curve to the right and increases price and quantity for it.

option B
B. The equilibrium price of beef steaks should increase