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 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

The decrease in population of dairy cows will shift the supply curve of milk to the left, increasing the equilibrium price and decreasing the equilibrium quantity. However, since milk has an inelastic demand, the decrease in quantity demanded will be relatively small. On the other hand, the decrease in population of beef cattle will shift the supply curve of beef to the left, increasing the equilibrium price and significantly decreasing the equilibrium quantity due to the elastic demand for beef. Therefore, the change in equilibrium quantity will be greater in the beef market than in the milk market.

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