Scenario 5-3
Milk has an inelastic demand and beef has an elastic demand.Suppose that a mysterious increase in bovine infertility decreases both the population of dairy cows and the population of beef cattle by 50 percent.
-Refer to Scenario 5-3.The equilibrium price will
A) increase in the milk market and increase in the beef market.
B) increase in the milk market and decrease in the beef market.
C) decrease in the milk market and increase in the beef market.
D) decrease in the milk market and decrease in the beef market.

Question

Quizplus · Accepted Answer

The decrease in the population of dairy cows and beef cattle reduces the supply of both milk and beef. Since milk has inelastic demand, the price will increase significantly as consumers are less responsive to price changes. For beef, with elastic demand, the price will also increase, but the quantity demanded will decrease more significantly.

Scenario 5-3 Milk Has an Inelastic Demand and Beef Has an Elastic