The Econville News reports that drinking at least 8 ounces o

  The Econville News reports that drinking at least 8 ounces of milk a day increases bone density 10% over a life time. Provide a brief written description/explanation of the effect of this news on the equilibrium price and quantity of milk.

Solution

The news reports pertaining to health will always have a positive effect on the product consumed. Especially when the products are related to increasing the life span of an individual or contributing to the health of an individual then it will definitely create a positive impact on the consumption of the product.

For instance in the given statement it is mentioned that drinking milk contributes to the increase in bone density. This will definitely increase the demand for the milk as well as increase the quantity of milk consumed. Milk is a product which is competitive in nature as there are more producers. These suppliers will tend to make use of this opportunity, and give a marginal increase to the price of milk being supplied. Being an essential product, the price of milk and milk related products will only affect the consumption to reduce by a margin. The quantity demanded will be proportional to the quantity consumed. Hence both the suppliers will be able to make profits both in the short run and in the long run.