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) may be greater in either the milk market or the beef market.

Question

Quizplus · Accepted Answer

Since milk has an inelastic demand, the decrease in supply (due to the decrease in the population of dairy cows) will cause a larger increase in equilibrium price than in equilibrium quantity. In contrast, since beef has an elastic demand, the decrease in supply (due to the decrease in the population of beef cattle) will cause a larger increase in equilibrium price than in the milk market, and a larger decrease in equilibrium quantity than in the milk market. 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