Suppose we observe the following two simultaneous events in the market for beef. First, there is a decrease in the demand for beef due to changes in consumer tastes. And second, there is a reduction in supply due to cattle farmers selling their land to real estate developers. We know with certainty that these two simultaneous events will cause which of the following? A. No change in the equilibrium quantity and a reduction in the equilibrium price
B. An increase in the equilibrium quantity and in the equilibrium price
C. A decrease in the equilibrium quantity and an indeterminate change in the equilibrium price
D. A decrease in the equilibrium quantity and an increase in the equilibrium price

The correct answer is OPTION C (A decrease in the equilibrium quantity and an indeterminate change in the equilibrium price)

Explanation:

The equilibrium price in the question is the price at which the quantity of beef demanded equals the quantity supplied by the cattle farmers. When demand decreases the equilibrium price falls and the quantity of beef purchased also decreases.

The equilibrium quantity for the beef is the quantity of beef demanded and the quantity of beef supplied by the cattle farmers at the equilibrium price.

The two simultaneous events from the question will cause the equilibrium price or quantity to be affected and move in the same direction as demand and supply for the beef.

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