Only for Professor Ryan

Part I

Read this the article “Milk prices may hit $7 a gallon in 2013” and explain in 1 ½ page  likely contributing factors to increasing milk price? Milk prices may hit $7 a gallon in 2013 The New Year could push milk prices to $7 a gallon. With Congress spending all its time trying to avert the fiscal cliff, a slew of other legislative matters are going unattended. One of them is the agriculture bill which, if not addressed, could lead to a doubling of the price of milk early next year. It works like this: In order to keep dairy farmers in businesses, the government agrees to buy milk and other products if the price gets too low. The current agriculture bill has a formula that means the government steps in if the price of milk were to drop by roughly half from its current national average of about $3.65 a gallon. Problem is, the current bill expired last summer, and Congress had been unable to agree on a new one. Several protections for farmers have already expired, and several more are set to do so over the next few months. One of them is the dairy subsidy, which expires January 1. But instead of leaving farmers entirely out in the cold, the law states that if a new bill isn't passed or the current one extended the formula for calculating the price the government pays for dairy products reverts back to a 1949 statute. Under that formula, the government would be forced to buy milk at twice today's price - driving up the cost for everyone.

 Part II

Just answer this questions

1. Carefully explain why a typical demand curve slopes downwards.

2. Distinguish between normal and inferior goods.

 3. What are the main underlying determinants of demand for the following:

I. Cars     II. Cloths    III. Healthcare