Refer to the following information about the meat-production industry in Country X:The meat-production industry in Country X has experienced significant changessince the 1960s when beef was the most frequently purchased meat. Theconsumption of all types of meat has increased since the 1960s; however,chicken has now replaced beef as the most frequently purchased meat.After adjusting for inflation, the average price of beef has changed from $22.00per kilogram in 1960 to $30.80 per kilogram in 2020, making beef a luxury itemfor many people. The average price of chicken has changed from $12.00 perkilogram in 1960 to $5.60 per kilogram in 2020, making it one of the cheapestmeats.The production of beef takes longer and requires more land than the production ofchicken. Since the 1960s, the production of chicken has become more intensive,more automated, and has had significantly larger gains in efficiency than theproduction of beef.(a) Describe how meat production in Country X illustrates the economic question of ‘What toproduce?’.__________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________ (2 marks)(b) Compare the likely price elasticity of demand for beef with the likely price elasticity of demandfor chicken in 2020. Justify your answer
Question
Refer to the following information about the meat-production industry in Country X:The meat-production industry in Country X has experienced significant changessince the 1960s when beef was the most frequently purchased meat. Theconsumption of all types of meat has increased since the 1960s; however,chicken has now replaced beef as the most frequently purchased meat.After adjusting for inflation, the average price of beef has changed from 30.80 per kilogram in 2020, making beef a luxury itemfor many people. The average price of chicken has changed from 5.60 per kilogram in 2020, making it one of the cheapestmeats.The production of beef takes longer and requires more land than the production ofchicken. Since the 1960s, the production of chicken has become more intensive,more automated, and has had significantly larger gains in efficiency than theproduction of beef.(a) Describe how meat production in Country X illustrates the economic question of ‘What toproduce?’.__________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________ (2 marks)(b) Compare the likely price elasticity of demand for beef with the likely price elasticity of demandfor chicken in 2020. Justify your answer
Solution
(a) The economic question of 'What to produce?' is illustrated in the meat production of Country X through the shift in production from beef to chicken. This shift is driven by several factors. Firstly, the cost of production for beef is higher than for chicken, as it requires more time and land. Secondly, technological advancements have made chicken production more efficient and automated, leading to larger gains in efficiency. Lastly, consumer preferences have changed, with chicken now being the most frequently purchased meat due to its lower price compared to beef. Therefore, in response to the economic question of 'What to produce?', Country X has increased its production of chicken to meet the growing demand and to maximize efficiency and profits.
(b) The price elasticity of demand for beef is likely to be more elastic than for chicken in 2020. This is because beef is now considered a luxury item due to its high price, meaning consumers are likely to significantly reduce their quantity demanded if the price increases, and vice versa. On the other hand, chicken is one of the cheapest meats, so consumers are less likely to change their quantity demanded if the price changes, making its demand inelastic. This is justified by the law of demand, which states that the quantity demanded of a good is inversely related to its price, other things being equal. Therefore, a change in price will have a larger effect on the quantity demanded of beef than on chicken.
Similar Questions
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