Scenario 5-3 Milk Has an Inelastic Demand, and Beef Has an Elastic

question 461

Multiple Choice

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 equilibrium quantity will

• A) increase in both the milk and beef markets.
• B) increase in the milk market and decrease in the beef market.
• C) decrease in the milk market and increase in the beef market.
• D) decrease in both the milk and beef markets.

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Definitions:

Bad Debt Expense

The cost associated with accounts receivable that a company determines will not be collected, recognizing it as an expense.

FOB Destination

A shipping term indicating that the seller retains ownership and responsibility for goods until they are delivered to the buyer’s location, at which point the buyer takes ownership.

Sale Recorded

The process of documenting a sale transaction in the financial books of a company, recognizing revenue.

Deposits in Transit

Funds that have been received and recorded by a company but not yet by its bank.