Scenario 5-5
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 5-5. Total consumer spending on milk will
A) increase, and total consumer spending on beef will increase.
B) increase, and total consumer spending on beef will decrease.
C) decrease, and total consumer spending on beef will increase.
D) decrease, and total consumer spending on beef will decrease.

Question

Quizplus · Accepted Answer

When demand is inelastic, a decrease in supply leads to a higher price and increased total spending. For elastic demand, a decrease in supply leads to a higher price but decreased total spending.

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