Supply, Demand, and Price Elasticity Supply and demand factors in many characteristics. Any product or service is involved in supply and demand. Milk is a product that is affected by the supply and demand aspect of economics. Several characteristics determine the causes for shifts in supply demand for milk. Milk is a product that almost everyone uses, and in most cases is viewed as a necessity. Milk is a product that will always be in high demand. This product is included in the food pyramid of healthy foods; therefore people will always want milk. There are however some factors that do affect the supply of milk. For example if a disease outbreak occurs in cows, the milk supply may drop. One aspect that has affected milk prices of in the past is Mad Cow Disease. Mad Cow Disease is an illness that has infected cattle since 1986. It is a disease that affects the brain. Since its first appearance in British dairy herds in 1986, BSE has affected roughly 200,000 cattle (Grace, n.d.). There was a more recent outbreak in America that caused cattle ranchers to put down several cows. As of November 2006, 3 individuals with mad cow disease had been identified in the United States (Kulger, 2006). Several cows were put down causing the supply of milk to decrease, because the supply decreased the price increased. The demand for milk stays virtually the same; people were just paying more for the product. People are willing to pay a higher price for milk because it is viewed as a need. When shifts occur in supply and demand, price, quantity, and market equilibrium can all be affected. As the price of milk falls in grocery stores, there is going to be more demanded from the consumer. The amount of milk bought at one time will increase. Families will buy two or three gallons instead of one at a time. As the price of milk increases in stores, less will be demanded from the producer. As the price of milk increases in the stores the producer will be paid more. During these times it seems producers add more cows to their herds and more milk is produced. This can flood the market with supply and the price will fall in stores to basically compensate for the supply of milk. This will affect the consumer and producer. The consumer will be happier as to the lower price of milk, but the producer will feel the affect in their check. There are factors that can affect the supply to be less demanded. Demographics, price and futures can play a role. An area of people just may not care for the taste of milk so they buy soy milk. Organic milk may be in more of a demand in higher income areas. These factors and raise the price of milk due to no one purchasing milk. The market equilibrium may shift and the supply may be decreased. Milk is a definitely a necessity and not a luxury. Milk is crucial in an infant’s diet as well as in adults. Milk enhances growth and makes strong bones. Milk is not a luxury like other commodities such as coffee. Milk makes you healthy and coffee is addicting. Milk contains all the nutrients necessary for growth such as minerals, vitamins, and protein. Even though milk is good for you it can still cause food allergies. Other substitutes for milk are soy, rice, and almond milk. Milk users can have different options when preparing food or just to drink. Some users are avoiding dairy products to reduce fat or just because they want to try new products. Dairy substitutions are only a matter of taste. It can vary from sweetness to thickness. The price range for any type of milk doesn’t differentiate much. Most milk users will still continue using dairy milk just for the fact that they were raised drinking it. Adults tend to use substitutes when they go more in depth in nutritional value or taste when baking and cooking. In conclusion, while there are many different brands of milk it is hard to substitute the actual milk product because it is a dairy and proprietarily comes from a cow. One could consider dry milk to be a substitute but even that product is missing dairy product in order to maintain freshness on the shelf. Others could debate that soy and almond milk is a substitute to milk but even these two products are missing a key ingredient, dairy. The products that could be considered substitutes to milk are not the deciding factor on the elasticity of the price on the product; factors that are the deciding factors on the price of milk consist of things that are more based on the economy and weather. Price elasticity will change if there is a drought and the cows are not getting enough water and grain to produce milk. Other factors to consider when it comes to the price elasticity of milk are the current and future state of the economy. With oil prices on the rise and gas becoming increasingly more expensive it will eventually trickle down to the truck drivers that carry the milk and the machines that pasteurize the milk causing the price of milk to rise. While there are substitutes available in the market, because they are not milk products and are mainly for individuals who are lactose intolerant they will not have an effect on the milk prices because individuals will purchase what they like provided that the cost is not too high.