Supply And Demand Principles Essay Help For Free

Describe the price and quantity of milk when the following events occur.
A scientific study indicates that milk drinking is excellent for bone health.

If a scientific study demonstrates that milk drinking is excellent for bone health, market demand for the item will increase. This study might influence the purchase decisions of customers, leading to a greater willingness to consume milk for its beneficial effect on bones. If the milk supply remains unchanged, a rise in demand could result in a milk shortage and a price hike (Andreyeva, Long, and Brownell 216). Scientist studies that demonstrate the significance of a given commodity serve as marketing techniques for the connected items; as a result, they contribute to an increase in demand for the commodities.

An outbreak of mad cow disease has occurred.

If an outbreak of mad cow disease occurs, consumer behavior would shift and milk demand would decline. Because the majority of customers would equate milk consumption with the disease. It would result in an increase in the volume of milk available on the market, and as a result, its price would decrease. Consumer behavior is significantly influenced by market reviews of a product; hence, connecting a product with the spread of a serious disease, such as mad cow disease, can have a substantial negative impact on its sales (Mills and Law 76). It is feasible for there to be zero milk sales under this situation.

The cost of almond milk falls.

If the price of almond milk decreased, it would provide a feasible alternative to cow milk, and its health benefits would entice more consumers to switch to almond milk. It would ultimately result in a decline in the demand for cow milk, and as a result, the price of cow milk may fall as retailers seek to increase sales. The availability of cheaper alternatives of comparable quality raises competition for related products.

The purchasing power of customers influences their consuming habits. Almond milk is a healthier alternative to cow milk, but its supply is limited, hence its price is much higher (Aaalami, Moghaddam, and Yousefi 243). If the price of almond milk fell to a point where most consumers of cow milk could afford it, they would prefer to purchase almond milk.

To encourage healthy families, a milk price cap is imposed.

The impact of implementing a price ceiling for cow milk would depend on the relationship between the price ceiling and the product's market price. If the price ceiling is less than the market price, cow milk demand would expand exponentially, resulting in shortages. In contrast, if the price ceiling for cow milk is higher than the commodity's market price, it would have no direct effect on milk demand and supply.

Price ceilings are designed to prevent the connected commodity's price from exceeding a specified threshold. This price control influences demand and supply curves directly if the price ceiling is set below the product's current market price (Engelmann and Muller 291). In such a scenario, more consumers would be able to afford the goods, hence increasing its demand and decreasing its supply. In spite of the decreasing supply, the price of the product is maintained below the ceiling; hence, the price of the product remains unchanged.

Suppose Johnny consumes four glasses of milk daily, regardless of the cost. What type of flexibility does it possess?

Johnny's daily consumption of four cups of milk, regardless of the price of milk, exemplifies exactly inelastic demand for the product. With this form of demand, the commodity's price has no effect on customer behavior. Customers continue to desire the same quantity of a product regardless of whether the price rises or falls (Andreyeva, Long, and Brownell 216). The majority of products with perfectly inelastic demand are necessities for customers; hence, they must acquire the same number of units regardless of price. In the majority of instances, these goods do not have cheaper alternatives that buyers can choose from. In Johnny's position, he appears to have few options; hence, he must purchase the same amount of milk regardless of the price.

Consider a scenario in which a 40% rise in the price of milk results in a 10% decrease in the percentage change in the quantity desired by consumers. Determine the elasticity.

Calculate the elasticity of demand by dividing the percentage change in quantity required by the percentage change in the related commodity's price. The elasticity of demand is -10% divided by 40%, which equals -0.25, given that the amount desired by customers and the price move in opposite directions. It is a flexible demand (Rios, McConnell, and Brue 34).

What happens to overall revenue when milk prices are raised? Why?

Due to the fact that an increase in the price of milk reduces its demand, revenue would fall. The retailers would lose 10% of their milk consumers for every 40% price rise, assuming that successive price increases had the same effect on demand. As the price increases, demand declines, resulting in decreased sales for milk producers and distributors ("Market Effects: Change in Demand," par. 1).

It would ultimately result in an excess milk supply on the market. The supply curve would shift rightward, whereas the demand curve would shift leftward. Assuming that the shift in the demand and supply curves has no effect on the price, a bigger price increase would result in a relatively low amount of income for the milk business, since more consumers would be unable to afford the product.

Changes in the market price always result in a shift in the demand and supply of the linked items; hence, a decrease in milk demand would result in a decrease in milk sales from the level of milk production to the retailers. The sale of commodities generates revenue, and a decline in milk sales would reduce the profit margins of producers and retailers that distribute the product.

Assuming Milk is a complement to a complementary product such as cereal, the fall in milk demand could result in a decrease in demand for certain of its complementary products, such as cereal. If consumers cannot afford milk, they do not need cereal. It would lead to a further decline in revenue. Any product related with milk would be less popular in stores if milk's demand decreased dramatically.

The shift of the connected items' demand curve to the right would result in a fall in their respective pricing and an increase in their supply. The determined value of milk's demand elasticity is -0.25, which is smaller than -1, indicating that milk is an elastic product. When the milk price climbs. Because the product would impact the sales of its complements, the total revenue is guaranteed to decline.

Sources Cited

Aalami, H. A., M. Parsa Moghaddam, and G. R. Yousefi. Demand response modeling taking interruptible/curtailable loads and capacity market programs into consideration. Applied Energy, 87, 1, 243-250 (2010). Print.

Andreyeva, Tatiana; Long, Michael W.; and Brownell, Kelly D. The effect of food prices on consumption: a review of the literature on the price elasticity of food demand. Print version: American journal of public health 100.2 (2010): 216.

Engelmann, Dirk, and Wieland Muller. "Conspiracy through price ceilings?" Seeking a focal point impact. Journal of Economic Behavior & Organization, Volume 79, Issue 3 (2011), pp. 291-302. Print.

Market Effects: Demand Change 2015. Web.

Juline Mills and Rob Law. Consumer behavior, tourism, and the Internet: a handbook. 2013 printing of London's Routledge.

Rios, Manuel C.; McConnell, Campbell R.; and Brue, Stanley L. Economics: Principles, challenges, and policies. 2013 edition published by McGraw-Hill in New York. Print.

[supanova question]

× How can I help you?