Market for Milk in the midst of the Coronavirus Pandemic
US farmers like others globally, are facing so serious disruptions in the supply chain that they are having to deal with rising excess stocks of milk. Schools, restaurants and various milk-processing units (all significant consumers/users of milk) have largely closed down due to the corona virus pandemic. The farmers are forced in the circumstance to dump excess milk.
Be the Economist that helps some young adults understand the economics of the situation by completing 1 through 4 below:
- Draw and label a market diagram showing the demand and supply for milk before the corona virus outbreak.
- Explain the relationship between demand and supply when the market is in equilibrium.
- Would the corona virus pandemic affect the demand for milk, supply of milk or both?
- Show any changes in demand and supply on the graph you drew in number 1 and explain them.
- Why is dumping the excess milk rational (economists assume rational behavior after all)?
