ECO 212 Week 1 DQ 2 - 7523

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3number
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Select a good or service in which you are familiar. What are the factors that affect the supply and demand of the good or service?

A product that has been interesting to me over the years to watch is the supply and demand process of fluid milk mostly because its movements translate into the financial outlook for dairy farms in my area. I find that farmers have a strange outlook on how to respond to market price changes. When prices are high (and therefore demand in this case), farmers increase the number of cows they are milking and try to maximize the amount of milk produced per animal. They do this thinking that they will take advantage of the high prices they are receiving and will net maximum profits. However, with that said, the result of increasing the amount of animals and the milk they are making, floods the market with milk and supply far exceeds demand. Once this happens, prices drop and the farmer finds himself receiving far less money for the milk he is selling, and on top of this he has more animals to feed and care for. In this case, market price drives the farmer to make decisions about his business and in turn, his decisions affect the supply of milk. Demand for milk is consumer driven. The consumer's desire for milk is influenced by many factors. On a mental level, they may be influenced by the media telling that milk is either healthy or unhealthy. They may hear bad press about dairy farming and decide to search for non-dairy substitutes such as soy or rice milk so as not to support a "bad" group of individuals. Or their decision making process could be driven by their personal finances and need for convenience. Perhaps it is less expensive to buy milk than juices or soft drinks. Milk is rarely on sale, it cannot be stored for long periods of time so buying in bulk is not practical, and it is not as easily portable for lunches or travel. These are just a few examples of factors affecting supply and demand for fluid milk. 



Solution Description

Select a good or service in which you are familiar. What are the factors that affect the supply and demand of the good or service?

A product that has been interesting to me over the years to watch is the supply and demand process of flu