Milk is an option or necessities? Milk might be a necessity for certain groups like babies, children and old age adults to help them in growth and also make sure their bone is not fragile because the main ingredient in the milk are protein and calcium. In fact, America is one among all the countries who produces the most cows’ milk in year 2009 – 2011 with accounting for 14.7% of the world production whereas India is the second largest with accounting for only 8.7% of the world production. The table below shows that the World Top Ten List of Producing Milk from year 2009 to 2011 (DairyCo, 2013).

     Recently, there is an issue happen in our world which is quite serious. It is about the mad cow disease that contains the infection in the beef which will cause the human to death due to the tainted beef consumed by consumers (Rampton, 2012). Besides that, there is a climatic change which is drought happen that cause the beef and dairy products to have a shortage besides the mad cow disease (Paterson, 2013).

Shortage will happen when the demand is exceeding the supply which means that the suppliers in the market don’t have the willingness to produce the amount that the consumers’ willingness to buy. 

     According to Oxford Dictionary (2007), demand is define as the requirement, needs or desire of a person but in economic terms, it is slightly different which demand is the willingness of a consumer to pay on a certain amount of money on a goods or services provided (Investopedia, 2013). For example, when mad cow diseases or drought happen, a lot of cows has to be killed. Therefore, the demand for the dairy products or beef from consumers will be lower and lower due to certain reasons.

          

 

        The first reason that will cause the demand to be lower or higher is the number of buyers in the market (Hawa, 2013). For example, there will be fewer consumers buying the dairy products or beef from America whereas they will increase their amount to buy the dairy products from India. As a result, there will be a shift in the demand curve which the demand curve will shift towards the left because the number of buyers is decreasing. Besides that, the demand for India supplier to import their products will be increase and the demand curve will shift to the right due to due to the increase in the demand of the consumers.

     Besides, the demand for substitute goods to replace beef such as chicken, lamb, pork and so on will increase because there is no way for them to consume the infected cow anymore. Therefore, at that moment, they will sacrifice their favourite food which is beef and willing to accept the substitute goods. Furthermore, the consumers will also buy the goat’s milk, coffee or tea to replace the milk. As a result, this will lead the demand curve for substitute goods to shift to the right. 

Moreover, the consumer expectation will also affect the demand curve to shift as we; consumers always will predict the price of certain products available in the market so that we can benefit from the price of certain groups (Boundless, 2013). Hence, the demand will increase due to consumers expect the amount of dairy products that will be available in the market will be little and the price will increase in the future therefore; they will use this time to purchase as many as they can. 

Next, habit is defined as the practices or tendency of a person that is hard to give up as stated in Oxford Dictionary (2007). The habits of the consumers will also affect the changes on the demand curve as some people don’t like to drink milk or got allergic to milk. For example, if Mary has the habit that every day she must have at least a cup of milk and this will results in the increase of the demand curve. On the other hand, David feels that he must drink a cup of coffee before going to work so that he have the energy for the following hours. This unfortunately will decrease the demand curve.

Supply is the fundamental economics concept which defined as the total amount of goods that is available in this market and also the willingness of the supplier to produce the products for our consumers (Investopedia, 2013). The determinants of supply will also affect the supply curve to shift either to the left (decrease in supply) or right (increase in supply).

First and foremost, due to the mad cow disease happen, the supply will also decreases until they had come out a way to solve this problem. 

Table above shows that in year 2005 which is the starting of mad cow diseases, the sales is not stable in California.

Furthermore, the changes of the weather or natural disaster such as drought will decrease the number of cow (Paterson, 2013). Drought will happen because of the shortage of water thus this will results a lot of dairy cows dead because there is not enough water for them to consume. Thus, this will lead to a decrease in the supply because the supplier in America will reduce the amount of beef to be exported out to other countries so that there is always enough beef for their own citizen.

Last but not least, the producer expectation is also one of the reasons (Amosweb, 2013) because producer will expect that when there is a little amount of milk in the market now, therefore, they will expect that there will be higher price in the future thus, they won’t produce much at a lower price but more in the future. In this case, this will lead to the shift of the supply curve to the left.

Based on the article I have read, it shows that there is shortages occur in the market of America. However, according to the World Health Organization, they had come out a great solution that they have undergo a test that shows human will not be infected by drinking milk from BSE-infected animals (Star, 2012). Besides that, they also prove that only tainted beef which consists of prion (Kiefiuk, 2009). Prion is an abnormal type of protein in the brain which will lead to the dead of the brain cell (Paddock, 2011). In order to overcome the shortages, some suppliers will increase the price of the dairy products or beef so that the demand will be less and therefore, there will be a movement along the demand curve which is going upwards whereas the supply will increase due to the increase in the price of the products thus this will lead the movement of the supply curve to move upwards and as a result, both of the supply curve and the demand curve will meet at a point which is the equilibrium point where the demand is equal to the supply. Furthermore, according to Dunmore and Waters (2012), they also show that when the mad cow disease problem has been solved, a lot of countries like Mexico, South Korea, Japan, Canada and the European Union will start to import the beef or cattle from the America. 

     China uses a way to overcome the shortages of milk in their market which is that they imports dairy cows from other country to make sure that the demand for milk still continues (Wessler, 2012). In my opinion, this is a good idea that America market can consider this solution as they could import dairy cows from India or China so that the shortages will be overcome as the amount of supply will increase to meet the demand that the consumers want. Besides, Kenya dairy board also provides a solution to overcome the shortage of milk in future by investing long life milk products (KTN Kenya, 2012). 

I also feel that America can increase the price of the dairy products or beef in order to overcome the shortages problems because for my knowledge of economics when the price has increases, the demand will fall. As a result, market equilibrium occurs when demand is equal to supply (Sloman, Wride and Garratt, 2012).

       

To increase the price of milk, it shows that there is not big issue for America because as I mention above, milk is a necessity for a certain groups. Therefore, it shows that there is an inelastic demand between the price of good and the quantity demanded. The definition of inelastic demand is that there will be no big effect on the quantity demanded when the price is increase (Investopedia, 2013). Hence, if America wanted to increase the price, it is safe for them as the people will still buying or importing the products from America. Thus, the sales of America will either maintaining or rise up. 

References:

AmosWeb (2013) Seller’s Expectations, Supply Determinant. Available from: http://www.amosweb.com/cgi-bin/awb_nav.pl?s=wpd&c=dsp&k=sellers'+expectations,+supply+determinant [Accessed on 25 May 2013].

Boundless (2013) Outlook for the Future. Available from: https://www.boundless.com/economics/principles-supply-demand/factors-shifting-demand-curves/outlook-for-future/ [Accessed on 25 May 2013].

DairyCo (2013) Market Information: World Milk Production. Available from: http://www.dairyco.org.uk/market-information/supply-production/milk-production/world-milk-production/ [Accessed on 1 June 2013].

Dunmore, C. and Waters, T. (2012) Buyers of U.S. beef keep importing after mad cow case. Available from: http://thestar.com.my/news/story.asp?file=/2012/4/26/worldupdates/2012-04-26T051743Z_1_BRE83P07E_RTROPTT_0_UK-IMPORTS-MADCOW&sec=Worldupdates [Accessed 25 May 2013].

Hawa, R.S. (2013) Mad Cows and Englishmen: The Globalisation of Disease. Available from: http://www.twnside.org.sg/title/mad.htm [Accessed on 6 June 2013].

Investopedia (2013) Definition of ‘Supply’, ‘Demand’ and ‘Elasticity of Demand’. Available from: http://www.investopedia.com/terms/s/supply.asp [Accessed on 6 June 2013].

Kiefiuk, C. (2009) Mad Cow Disease. Available from: http://amazinghealth.com/AH-health-mad_cow_disease-BSE-bacteria [Accessed on 3 June 2013].

KTN Kenya (2012) Milk Shortage. YouTube [video]. 14 March. Available from: http://www.youtube.com/watch?v=otuBmg8Fn5E [Accessed 3 June 2013].

Paddock, C. (2011) Prions That Cause Mad Cow Disease Can Spread Through Air. Available from: http://www.medicalnewstoday.com/articles/213819.php [Accessed on 3 June 2013].

Paterson, K. (2013) Drought impact shakes up latest auction, milk shortage tipped. Available from: http://www.nbr.co.nz/article/shrinking-volumes-dairy-products-offer-latest-gdt-sale-underline-drought-impact-bd-137483 [Accessed on 3 June 2013].

Rampton, R. (2012) Mad cow disease found in California; no human threat seen. Available from: http://thestar.com.my/news/story.asp?file=/2012/4/25/worldupdates/2012-04-25T002443Z_2_BRE83N1E1_RTROPTT_0_UK-USA-MADCOW&sec=worldupdates [Accessed 26 May 2013].

Sloman, J., Wride, A. and Garratt, D. (2012) Economics. 8th ed. England: Pearson Education Limited.

The Star (2012) New case of mad cow disease in California. Available from: http://thestar.com.my/news/story.asp?file=/2012/4/25/reutersworld/20120425092546&sec=reutersworld [Accessed 26 May 2013].

Wessler, B. (2012) China imports dairy cows as demand for milk continues. Available from: http://www.dairyherd.com/dairy-news/China-imports-dairy-cows-as-demand-for-milk-continues-136947463.html [Accessed on 1 June 2013].