Please give a detailed explanation with diagrams to support your answer. Calves
ID: 1102976 • Letter: P
Question
Please give a detailed explanation with diagrams to support your answer.
Calves are born to dairy cows each year and they are typically sold as a joint product, along with milk, by dairy farms. The calf is then raised and sold into the veal market or, if older, the beef markets, or sold to anyone who wants a dairy cow. The value of these calf sales contributes about 10 percent to total dairy farm revenues. The BSE (mad cow disease) crisis lowered the value of all beef and dairy calves to almost zero. Assume that BSE reduced the demand for meat but not the demand for milk.
a) How would this BSE crisis have changed the price of dairy cows that are productive and actively milking in the herd? Will the price of those milking cows be unaffected because there is no change in the price of milk? Illustrate with the appropriate diagrams and explain your answer.
b) Later, the supply of beef on beef ranches will fall substantially due to the unprofitability of those low beef prices. Show and explain what would happen then to milk production in an open market milk industry, one not heavily regulated like that in Canada (e.g., the US)?
Explanation / Answer
a) there prices would also fall because of the generally tendency of people to stay away from alarmed issues. People's demand for the dairy products and meat would eventually fall down.
B) as the prices of the beef will fall down more cows would be sold to farm instead at cheaper costs and the milk production would increase.