Question

Watch the YouTube video, link below. Using a demand/supply diagram, explain how reduced milk prices may have resulted from:

https://www.youtube.com/watch?v=7KPWLSVn0ko&t=90s

1. A dropping worldwide per person milk consumption since 1967.

2. Improved technology in milk production.

Answer 1

Improvement in technology and through automation, industrialization is slowly gripping its pace. Currently the high performance cows that produce more milks have replaced the the ordinary cows. The combination of a robust demand for dairy products and a responsible production growth seemed supporting the price fall.

Better technology helped maintain the place where cows are kept ( machines did the cleaning as well as milking the cow), so the farmers now breed twice the number of cows. The increased in surplus of milk reduced the price.

Investing in plants and machinery for milk power and ready cook milk, increased the amount of milk to be sold in the market. Policy stance by European Union (EU) in liberalizing the market too resulted in milk supply. The separate effects of quota elimination and the carryover effect of high prices and margins on EU milk production growth thus cannot be disentangled.

It is safe to conclude that the impact of milk production growth coupled with usage of advanced technologies have brought down the prices in one of the milk and milk products producing nations.