A 23 Feb 2015 farm journal reported the following events that affected the market for milk that year. The number of cows in the U.S. increased 0.9%, and the amount of milk produced per cow increased 2.4%. It also reported that household income in the US grew slowly. The following questions explore the effects of these changes on the market for milk.
Which milk demand and/or supply determinant(s) is/are affected?
What would be the effect of these effects on the demand and supply of milk?
With a carefully labeled diagram (label axes, original and new curves, original and new equilibrium prices and quantities), illustrate the effects of these events on the market for milk.
What would be the effects of these events, ceteris paribus, on the equilibrium price and quantity of milk?