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 equilibrium quantity will
A)increase in both the milk and steak markets.
B)increase in the milk market and decrease in the steak market.
C)decrease in the milk market and increase in the steak market.
D)decrease in both the milk and steak markets.

Question

Quizplus · Accepted Answer

Given that both milk (inelastic demand) and steak (elastic demand) are derived from cows, a decrease in the cow population by 50% would lead to a decrease in the supply of both milk and steak. Despite the differences in elasticity, the immediate effect of a reduced supply is a decrease in the equilibrium quantity available in both markets.

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