Scenario 5-2
Milk has an inelastic demand, and steak 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 5-2. The change in equilibrium quantity will be
A)greater in the milk market than in the steak market.
B)greater in the steak market than in the milk market.
C)the same in the milk and steak markets.
D)unknown without more information.

Question

Quizplus · Accepted Answer

The change in equilibrium quantity will be greater in the steak market than in the milk market because steak has an elastic demand. When demand is elastic, quantity demanded is more responsive to price changes. Since the supply of beef cattle decreases, prices will rise, leading to a significant reduction in quantity demanded for steak. In contrast, milk has an inelastic demand, meaning consumers' quantity demanded is less responsive to price changes, resulting in a smaller change in equilibrium quantity.

Scenario 5-2 Milk Has an Inelastic Demand, and Steak Has an Elastic