Kevin U’s Supply and Demand Assignment


Market: Brazilian Milk

There has been a decrease in the supply of Brazilian milk. A drastic drop in supply of Brazilian milk has caused the price of milk to increase in the country. Prices paid to producers rose to an average of 2.2%, compared to January, 17%. The average price of milk in February 2017 was BRL 1.32/litre, 18% higher than in February 2016. The demand has not changed, but there has been a decrease in supply. Therefore, this would inevitably result in an increase in price of Brazilian milk. Of the 5 supply determinants, the one applying to this case is cost of factors of production. The milk supply drop is due to the recent excess of rain across the country, and lower investment into maintenance and reform of pastures, as well as the purchase of animals and medicines. This caused the supply curve to shift to the left, increasing the price and reducing the quantity. Finally, this caused a shift from the market equilibrium, to move more left on the demand curve.



econ supply demand graph






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