Dairies make low-fat milk from full-cream milk. In the process of making low-fat milk, dairies produce cream, which in turn makes ice cream. In the market for low-fat milk, the following events occur:
a) The wage of dairy worker rises
b) The price of cream rises
c) The price of low-fat milk rises
d) A new technology lowers the cost of producing ice cream
e) Dairy farmers switch some of the production of full-cream to vegetables, based on input from health research studies.
Problem 2: Provide three everyday examples to illustrate what we mean by choosing at the margin. What roles do you believe marginal analysis has in the use of economics as a policy tool?
Problem 3: List all the influences on buying plans that change demand, and for each influence, say whether it increases or decreases demand.