Question

Assume that eggs and cereals are substitute products for breakfast. If a disease kills a large number of chickens, what will happen to the demand of cereal?

a. the demand for cereal will stay the same
b. the demand for cereal will shift to the right
c. the demand for cereal will shift to the left
d. the quantity demanded of cereal will increase
e. the quantity demanded of cereal will decrease

Answer 1

Due to eggs and cereal being substitute goods, a decrease in the supply of eggs caused by a disease would lead to an increase in the price of eggs, thus shifting the demand for cereal to the right as consumers seek alternatives.

Step-by-step explanation:

When two products are substitutes for one another, an increase in the price of one leads to an increase in the demand for the other. In this case, if a disease kills a large number of chickens, this will result in a decrease in the supply of eggs, likely causing the price of eggs to rise. As a result, consumers will look for alternatives for their breakfast choices, making cereal a more attractive option. Therefore, the demand for cereal will shift to the right, as consumers substitute away from eggs towards cereal due to the rise in the price of eggs.