Special Topic 3. The Stock Market: Its Function, Performance, and Potential as an Investment Opportunity.


a. Since pork can be considered as a substitute for beef hence due to higher price for pork people would like to substitute and beef's consumption demand would rise. b. We know that higher consumer income has a positive relationship with normal good's demand, since beef is a normal good and hence its demand would increase owing to a rise in income. c. Higher price for cattle food would raise the cost of production of beef. As a result price of beef would rise and as a result of it demand for beef would be reduced. d. Panic or news of disease would reduce the consumers demand for beef. e. An increase in the price of beef would reduce the consumer demand for beef, due to the negative relationship of own price and quantity demanded.

While constructing a demand curve mainly three things remain constant. One is the consumer's income; two is the price of related i.e. complementary as well as substitute goods and third is the taste and preference of the consumer. The rationale for negatively sloped demand curve is as follows- keeping other things constant if own price of a commodity changes the quantity demanded for that commodity will change in the opposite way. It implies if the own price increases quantity demanded would fall and if own price falls quantity demanded of the commodity would rise.

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