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.

Refer to Scenario 5-4. Total consumer spending on milk will

	a.	increase, and total consumer spending on beef will increase.
	b.	increase, and total consumer spending on beef will decrease.
	c.	decrease, and total consumer spending on beef will decrease.
	d.	decrease, and total consumer spending on beef will increase.

Answer 1

Answer) Inelastic demand is there when a change in price does not impact demand in significant way where as elastic demand refers to change in price having a significant impact on demand,in this case milk has inelastic demand,now if dairy cows' population decreases there will be less milk available leading to increase in price but since milk has inelastic demand,people will still buy thus leading to increase in total consumer spend on milk,now beef has elastic demand, decrease in beef cattle will lead to less beef thus increasing beef 's price but since beef has elastic demand that is people 's demand is price sensitive,there will be decrease in demand and total consumer spending on beef will decrease.

So option ( b.) Total consumer spending on milk will increase and total consumer spending on beef will decrease is correct option

Answer is complete.Thank you!