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. The change in equilibrium price will be

Question

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. The change in equilibrium price will be

greater in the milk market than in the beef market.

greater in the beef market than in the milk market.

the same in the milk and beef markets.

Any of the above could be correct.

Answer 1

The change in equilibrium price will be greater in the milk market than in the beef market. This is because milk has an inelastic demand, meaning that consumers are less responsive to changes in price, whereas beef has an elastic demand, meaning that consumers are more responsive to changes in price. As a result, a decrease in the supply of both dairy cows and beef cattle would lead to a larger increase in price for milk compared to beef.