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 change in equilibrium quantity will be
A) greater in the milk market than in the beef market.
B) greater in the beef market than in the milk market.
C) the same in the milk and beef markets.
D) Any of the above could be correct.

Question

Quizplus · Accepted Answer

Since milk has an inelastic demand, a 50 percent decrease in supply will result in a less than proportional decrease in quantity demanded. On the other hand, beef has an elastic demand, so a 50 percent decrease in supply will result in a more than proportional decrease in quantity demanded. Therefore, the change in equilibrium quantity will be greater in the beef market than in the milk market.

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