4 to 5 page essay that addresses the following questions on the market for milk. (for this case, keep it simple, don't worry about whether the milk is organic, 2%, whole, skim etc.)
Question 1. Explain what happens to price and quantity of milk when the following events occur:
a. More people start drinking soy milk.
b. There is a mad cow disease epidemic.
c. The price of milk increases.
d. The government decides to implement a price ceiling on milk.
For each event, you must specify how it effects either demand, quantity demanded, supply, or quantity demanded. It is also important to demonstrate how the change will affect the market demand or supply curve. Also, be sure to state any assumption you are making regarding the relationship of the event and milk.
e.g. There is a sale on cookies.
Assume that cookies are a complement to milk. If cookies are cheaper, then the consumer will increase quantity demanded of cookies. If consumers buy more cookies, then there will be a need for more milk to go with the cookies so the demand for milk will increase. This event causes a shift of the demand curve to the right. The shift will cause price and quantity of milk to increase.
Question 2. What are some of the determinants of the price elasticity of demand?
Question 3. Read section 1 and 2 of Chapter. What type of elasticity (elastic, inelastic, zero, etc.) do you think milk has based on your answer above. Explain.
Question 4. Based on your answer above, what happens to total revenue when the price of milk is increased. Why?
Recall from the powerpoint presentation:
Inelastic goods (goods in which consumers are less responsive to changes in price): e < 1
Elastic goods (goods in which consumers are more responsive to changes in price): e >1
In this course, we use the absolute value of elasticity. It is always a calculated value of -1 due to the law of demand.
Case Assignment Expectations:
Use concepts from the modular background readings as well as any good quality resources you can find from the cyberlibrary or other internet search engines. Pleas be sure to cite all sources within the text and provide a reference list at the end of the paper.
Length: 4-5 pages double spaced and typed.
The following items will be assessed in particular:
Your ability to understand an application of supply and demand.
Some in-text references to the modular background material (APA formatting not required).
The essay should address each element of the assignment. Remember to support your answers with solid references including the case readings.