Demand and supply analysis of United States milk production

¶ … milk production in the United States and will illustrate the same with the aid of a graph. The Works Cited three sources in MLA format.

Economics

The foundation of economics rests primarily on the concepts of demand and supply. In order to comprehend and accurately interpret the changes in any economic commodity that is milk for our research paper, it is essential to know the definitions of demand and supply and their relation to each other and their effect on the changes accompanying the production of an economic commodity.

Changes in Milk as an Economic Commodity

Milk is certainly one of those commodities that drive the American economy and is the reason for the existence of a dairy product industry offering a rich array of other products. On the same account, "the World Bank has identified a set of driving forces that are considered to have an important influence on the development of the livestock sector world-wide over the next two decades. These are growing demand for meat & milk, shifting consumer perspectives, changing functions of livestock, structural changes, and evolving international and national socioeconomic frameworks" (Haan et al., 2001).

Thus, milk is an economic commodity that is estimated to show a constant rise in demand thereby affecting the overall economy in various ways.

According to the Model Baseline Based on the USDA Baseline, 2001-2005, there has been a constant increase in the demand of milk all over the world particularly in the United States of America (Tentative Final Decision). Based on the past observations as well as thorough analysis, changes in milk production have been estimated for the consecutive years covering 2001, 2002, 2003, 2004 and 2005. The Baseline Model as formulated by the USDA shows a constant augmentation of the milk production revealing a stable affinity towards the consumption of the same (Tentative Final Decision). With the increase in customer demand, the production of milk has also increased. From the model under consideration, it is evident that the United State's suppliers or manufacturers of milk produced 19 million lbs. Of milk in the year 2001 (Tentative Final Decision). There was some increase in the milk consumption or a change in consumer behavior led to an increased demand of milk in the succeeding year that is year 2002 when compared to year 2001. Hence, the milk-manufacturing firms based in the United States were estimated to produce twenty million lbs. The year 2003 is estimated to bring about a major increase in the demand as well as supply of milk from twenty million lbs. To twenty-seven million lbs. Of milk (Tentative Final Decision). Hence, the current year is estimated to have the highest demand for milk in last as well as next two years. The year that follows 2003 is expected to bring a sudden decrease in the production that is demand of milk and the related change in the supplier behavior. Thus, the United State's milk production for the year 2004 is estimated to be twenty-five million lbs. Of milk (Tentative Final Decision). However, the year 2005 is predicted to help milk producers in the United States to reap massive benefits from this economic commodity. This is because, the Model Baseline by USDA estimates U.S. milk production for the year 2005 to increase as much as twenty-seven million lbs. same as year 2003 (Tentative Final Decision). Thus, from the above discussion, it is evident that the demand or the supply of neither economic commodity remains the same. Both demand and supply increase, decrease or remain the same, that is reach an equilibrium point, depending on the various factors that are responsible for influencing the supply and demand thereby affecting the price and quantity accordingly.

For better comprehension of the above discussion, explaining the changes in the demand and supply side of the United States milk sector, the graph below has been made. This crooked line shown with the aid of a graphical presentation makes it evident that the economic commodity of milk shows quite a stable rise in demand. However, the demand and supply sides keep varying. If they increase constantly, then they tend to gradually decrease and then gain momentum again and the cycle goes on and on.

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X-axis