Share
Explore BrainMass

Supply and Demand

The milk industry has a number of interesting aspects. Provide economic explanations for the following:

a. Fluid milk is 87% water. It can be dried and reconstituted so that it is almost indistinguishable from fresh milk. What is a likely reason that such reconstituted milk is not produced?

b. The US has regional milk-marketing regulations whose goals are to make each of the regions self-sufficient in milk. What is the likely reason for this.

c. A US Senator from a milk-producing state has been quoted as saying, "I am absolutely convinced...that simply bringing down dairy price supports is not a way to cut production." Is it likely that he is correct? What is a probably reason for his statement?

Solution Preview

The milk industry has a number of interesting aspects. Provide economic explanations for the following:

a. Fluid milk is 87% water. It can be dried and reconstituted so that it is almost indistinguishable from fresh milk. What is a likely reason that such reconstituted milk is not produced?
The cost of drying and reconstituting milk will increase the cost of milk such reconstituted milk, however, the price of such milk will be lower than normal fresh milk. Consumers prefer to buy fresh milk. As the demand for fresh milk is higher than such reconstituted milk, milk is not dried and reconstituted. ...

Solution Summary

This answer provides you an excellent discussion on Supply and Demand

$2.19