Question

Beef supplies are sharply reduced because of drought in the beef-raising states, and consumers turn to pork as a substitute for beef. How would you illustrate this change in the beef-market in supply-and-demand terms?

Please post detailed answer explaining why.

Answer 1

A decrease in the supply due to drought in the beef producing areas will shift the supply curve to the left i.e. at a higher price and lower output, but as the demand for the substitute increases it will shift the demand curve to the left as well .i.e. the new equilibrium will be at a lower price and lower output. Combining the two things the demand will decrease the price and supply will increase the price, overall the quantity of beef in the market will decease and the price will be indeterminate.