Question

2. Suppose that cow's milk and organic fertilizer (ie, the manure produced by dairy cows) are joint products in production and independent in consumption. Assume that milk is a normal good and that organic fertilizer (manure) is independent of income te., fertilizer demand does not change when income changes) Suppose that consumer income decreases. Hlustrate and explain the resulting effects on the market equilibrium price and quantity in both the milk market and the organic fertilizer (manure) market. In each market, clearly illustrate and label the new market equilibrium quantity and price. Make sure all text and graphical elements (lines and labels) can be easily read. (18 points] Specifically: a) illustrate and explain the effects of the decrease in consumer income in the milk market. In particular, illustrate the change in demand or supply and the resulting quantity demanded, Q', and quantity supplied, Q', at the initial market equilibrium price of milk, Po", and the shortage or surplus that develops in the milk market at P.. Explain the adjustment process to the new equilibrium market price and quantity b) Given the changes in the milk market, illustrate and explain the subsequent effects in the fertilizer (manure) market. In particular, illustrate the change in demand or supply and the resulting quantity demanded, Q', and quantity supplied, Q', at the initial market equilibrium price of fertilizer, P:", and the shortage or surplus that develops in the fertilizer market at P. Explain the adjustment process to the new market equilibrium price and quantity. Milk Market Organic Fertilizer (Manure) Market

Answer 1

Answer to both the subparts of your question are in the attached image file below.