Farmers can produce more milk at lower cost, but Americans want to drink only so much milk. This suggests that the demand curve for milk is:
A) elastic.
B) inelastic.
C) unit elastic.
D) unaffected by elasticity.

Question

Quizplus · Accepted Answer

The fact that farmers can produce more milk at lower cost suggests that they will try to increase their supply of milk. However, Americans only want to drink a certain amount of milk, meaning that the market demand for milk is relatively fixed. Therefore, any increase in supply will result in a greater quantity of milk being supplied than demanded, leading to a decrease in the price of milk. This indicates that the demand for milk is relatively insensitive to changes in price, making it inelastic.

Farmers Can Produce More Milk at Lower Cost, but Americans