Scenario 5-4
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 5-4.The change in equilibrium price 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

When demand is inelastic, a decrease in supply leads to a larger increase in price compared to when demand is elastic. Therefore, the price increase will be greater in the milk market, where demand is inelastic, than in the beef market, where demand is elastic.

Scenario 5-4 Milk Has an Inelastic Demand,and Beef Has an Elastic Demand.Suppose