Question
Assume that Figure 4-16 shows the supply of steak. An increase in the price of cattle feed will change the supply from a. \( \mathrm{S}_{1} \) to \( \mathrm{S}_{3} \). b. \( \mathrm{S}_{1} \) to \( \mathrm{S}_{2} \). c. \( \mathrm{S}_{2} \) to \( \mathrm{S}_{1} \). d. \( \mathrm{S}_{2} \) to S3.
Ask by Allan Frank. in the United States
Mar 21,2025
Upstudy AI Solution
Tutor-Verified Answer
Answer
An increase in the price of cattle feed shifts the supply curve from \( S_1 \) to \( S_2 \).
Solution
An increase in the price of cattle feed makes it more expensive for producers to raise cattle. Since cattle feed is an input in the production of steak, a rise in its cost reduces production profitability. This causes the supply curve to shift to the left (or upward) because at every price, producers are willing to supply less steak.
If the original supply curve is \( S_1 \) and the new, lower level of supply is represented by \( S_2 \), then an increase in cattle feed price shifts the curve from
\[
S_1 \text{ to } S_2.
\]
Thus, the answer is option (b).
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Simplify this solution Beyond the Answer
When the price of cattle feed increases, it raises the cost of production for steak. This typically leads to a decrease in the supply of steak, shifting the supply curve leftward. Therefore, if we assume that \( S_1 \) represents the original supply and there is a shift to a lower quantity supplied due to the increase in feed costs, the correct answer would be b. \( S_1 \) to \( S_2 \). In this context, understanding how input costs affect supply can help you grasp the broader dynamics of agricultural markets. Price fluctuations of essential inputs, like cattle feed, showcase the interconnected nature of supply chains and their impact on consumer prices.
