The economists at JET Consulting consider steak to be a normal good. During a recession, when...

The economists at JET Consulting consider steak to be a normal good. During a recession, when the income in the economy is decreasing, economists at JET Consulting would expect the demand curve for steak to ___________________ causing the equilibrium price to ____________ and the equilibrium quantity to ____________.

Select one:

a. Shift to the left; decrease; decrease

b. Shift to the left; increase; increase

c. Shift to the right; decrease; increase

d. Shift to the right; increase; increase

e. Shift to the left; increase; decrease Notes

Expert Solution

Since the law of demand stats that there is an opposite relationship between price and quantity demanded and other factors which affect the demand remains same. The demand curve shows an inverse relationship between price and quantity demand.

In case of change in the quantity demand, there will be movement along the demand curve and in case of change in the demand, there will be shift of the demand curve.

Normal good is that good which has positive income elasticity. It means with the increase in the income, the quantity demand for the normal good increases.

So when there is recession in the economy and steak is a normal good, so demand for steak will decrease and demand curve shift leftward. Hence equilibrium price and quantity both decreases.

When the economists at JET Consulting consider steak to be a normal good. During a recession, when the income in the economy is decreasing, economists at JET Consulting would expect the demand curve for steak to shift to the left causing the equilibrium price to decrease and the equilibrium quantity to increase.

Hence option a is the correct answer.

Rahul Sunny answered 2 years ago

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