Question: 11. Draw a supply and demand graph for steak (a normal good). Be sure to label your x and y axis, and label your curves

11. Draw a supply and demand graph for steak (a normal good). Be sure to label your x and y axis, and label your curves D1 and S1. Label the initial equilibrium E1.

Steak and potatoes are complementary goods. What will happen to equilibrium in the market for steak if the price of potatoes increases? Graph the impact of the price change, and label the new equilibrium point E2.

When the price of potatoes rises, the demand for steak falls. This is because steak and potatoes are complementary items.

After the price of potatoes increased, a breakout of mad cow disease killed all of the cattle in Northern Illinois. Graph the impact of the dead cows and label the new equilibrium point E3.

Compare E1 to E3. What is the COMBINED EFFECT of the changes in demand and supply on Price and Quantity? How do you know?

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