The learning objective of this discussion is to identify determinants of demand and supply; demonstrate the impact of shifts in both market demand and supply curves on equilibrium price and output; and examine the impact of price controls through an examination of shortages, surplus and deadweight loss.
This is an article with a video about surplus cheese in 2016. This ties in with Chapter 4 and Price Controls.
As you read the article, I want you to explain either by drawing a graph AND explaining your graph, or just explaining the mechanics of demand and supply.
The article mentions the following
” In 2014, China was growing rapidly, its middle class had more cash to toss around, and people started buying more and more milk (particularly powdered milk)from the United States”
1. For the Chinese market, as incomes increased and the consumption of milk increased, this would indicate that milk is what type of product in economic terms (think determinant of demand and change in income)
Also, in the article, ” Economies of scale have driven costs down and bolstered output. On top of that, the average cow produces more milk than ever before, thanks in part to better breeding. “
2. How would you represent this specific issue in a demand and supply graph?
3. Now putting the two together – the change in demand and the change in supply – what would have happened to lead to higher prices and higher quantities?
4. ” In the old days, the USDA ran a big program that would buy up millions of pounds of milk, butter, and cheese each year and simply … put it in warehouses, never to be consumed. That helped put a floor on prices”
How would you draw this on a graph? Is the price floor above or below equilibrium?
5. If the government did not buy up the surplus, what would have been the impact on farmers and on consumers?
Answering the 5 questions correctly is 2 points. = 10 points.
Here is the real work – this is a great article because it has so much economics embedded in it. I want you to find determinants of demand and supply in the article – as I did with the examples of the first two – this means you can’t use my examples. Also you only get one shot at this. When you respond to someone else, you won’t get points for adding on. So be sure to examine the article closely. I don’t know how many you’re going to find so I’m just going to put a random number for the total points possible.
You do get 10 points for your responses to two other students (total points, not per student).
When you identify the determinant in the article, copy and paste the sentence, explain if it is a demand or supply determinant, which one specifically i.e. technology, income etc and explain how it impacts equilibrium price and quantity. (i.e. it shifts right and price falls while quantity increases). For every determinant that you come up with, you get 4 points.
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