Plant milk sales in the United States totaled $2.5 billion at the end of 2020, accounting for 15% of all retail sales of milk, and 35% of the larger market for plant-based foods. By the end of 2026, Olson said, sales of dairy alternatives are projected to make up 30% of all milk sales. Much of that growth, Purcell said, will come from small-batch producers. i. Illustrate and explain the effect of the increased use of plant-based milk on (i) the dairy market and (ii) the overall milk market. ii. Explain how the supply chain issues affected the dairy market and describe how this would be corrected without the introduction of the plant-based alternative. Provide a graphical representation. iii. Is demand for (i) dairy milk and (ii) milk overall elastic or price inelastic? Explain your reasoning.
According to a professor at the University of Massachusetts Amherst, plant-based foods are “a really hot topic at the moment”. Irregular shopping habits that began during the pandemic, with panic buying and supply-chain issues, have also pushed more people to buy plant-based milk. Despite strong demand for basic foods like dairy products amid the coronavirus pandemic, the milk supply chain has seen a host of disruptions that are preventing dairy farmers from getting their products to market.
Plant milk sales in the United States totaled $2.5 billion at the end of 2020, accounting for 15% of all retail sales of milk, and 35% of the larger market for plant-based foods. By the end of 2026, Olson said, sales of dairy alternatives are projected to make up 30% of all milk sales. Much of that growth, Purcell said, will come from small-batch producers.
i. Illustrate and explain the effect of the increased use of plant-based milk on (i) the dairy market and (ii) the overall milk market.
ii. Explain how the supply chain issues affected the dairy market and describe how this would be corrected without the introduction of the plant-based alternative. Provide a graphical representation.
iii. Is demand for (i) dairy milk and (ii) milk overall elastic or price inelastic? Explain your reasoning.
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