Question

The market for soybeans is initially in equilibrium, with an upward-sloping supply curve and a downward-sloping demand curve. Because of mad cow disease, producers decide to replace bone meal with soybeans in cattle feed. The likely effect is that the:

Answer 1

The likely effect is that the: equilibrium price and quantity of soybeans will rise.

Step-by-step explanation:

When the quantity of goods supplied remains equal to the quantity of goods demanded then it refers to the Equilibrium price. It is the point where the demand and the supply curves in the market gets intersected. This will make the market to remain at equilibrium.

In the given example, the initial market for the soybeans remains in equilibrium. Due to the mad cow disease there was a decision taken by the producers to replace the bone meal with soybeans. This will result in the effect of equilibrium price and quantity of soybeans will rise.