Question

1. Assume that whole milk is a normal good. What would happen to the market for whole milk in each of the following cases:
   1. The price of breakfast cereal falls
   2. The price of 2% milk falls
   3. U.S. dairy farmers increase the production of milk
   4. An advertising campaign promoting the health qualities of consuming milk is successful

Answer 1

If the whole milk is a normal good then-

a>when the price of breakfast cereals falls so demand will increase and also related with increase in demand of whole milk, because they are complementary goods.

b>If the price of 2% milk Falls, it means there is also an effect on whole milk because it is a subsidiary of the total milk.

c>If there is more production of milk it means there will be more supply and that will result in falling of price of milk due to more quantity produced.

d>If the ad campaign is successful, it will results in more demand of the whole milk and that will result in high price with more supply.