Questions on Milk Markets, Prices, and Price Setting

Supply and demand: Markets, Prices and price setting 1. Explain what happens to price and quantity of milk when the following events occur: a. More people start eating cereal for breakfast. The assumption is that if more people start eating cereal for breakfast, the demand for milk will rise because people use milk on their cereal. There are substitutes for milk, including soy milk, almond milk, and other milk-like products. In addition, some people eat cereal without milk, wetting it with another substance or simply eating it dry. For example, granola-based cereals are often consumed like trail mix, rather than in the traditional bowl-of-milk format. Therefore, there may not be a one-to-one correlation between increased cereal consumption and increased milk consumption. However, if cereal consumption increases and the consumption has the same pattern as current cereal consumption, then milk consumption will increase. This is will increase demand. It is not a change in quantity demanded, but a shift in the demand curve. When the use of one product is tied to the use of another product and use of the first product goes up, demand for the second product will go up and tha t increase in demand will not be dependent upon the price in the original demand curve (Rittenberg Tregarthen, 2009). Therefore, with this shift in the entire demand curve, one would expect prices of milk to rise because demand will hold steady despite an increase in rising prices. b. There is aShow MoreRelatedMarketing Management 552 Final Exam1717 Words   |  7 Pages_____________________ Social Security # ________________ Please read all questions carefully. You have three hours to complete this exam so please take your time and double check all your answers once you are finished. Make sure your name and social security number are on both the exam form and the answer sheet (scantron). Caution: This is only a sample exam. 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