Friday, May 24, 2013

"Eat Mor Chicken" is the market response to "Where's the Beef?"---Nice graphic showing what is happening in the meat market...

A nice teaching moment courtesy of The Wall Street Journal. The graphic below illustrates how the increase in the price of beef at the wholesale level is increasing the price at the retail level AND  it is affecting the demand for a related good---Chicken.  Makes illustrating the concept of Substitutes pretty easy.

In economics, goods are substitutes if a DIRECT relationship exists between the change in Quantity Demanded of one good and the change in price of a second good.

If Price of Good 1 increases and the Quantity Demanded for Good 2 increases, and vice versa, if the Price of Good 2 decreases and the Quantity Demanded for Good 2 decreases then the goods are Substitutes.

You can see as the price of beef increases the demand for Chicken and Pork increases as well.  Now, there could be other reasons the demand for chicken/pork has increased other than the price of beef.

There is your homework.  Get to work! :)

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