Question

Cabot Creamery is packing a palette of 20-lb boxes of cheddar cheese to send to a local restaurant. There are five layers of boxes on the pallet, and each layer is three boxes wide by five boxes deep.

Answer 1

The question involves applying principles of supply and demand to determine the new equilibrium in the market for cheddar cheese under conditions of rising milk prices and increased health-driven demand.

Step-by-step explanation:

The subject of the question pertains to economic principles in the context of a market's demand and supply for cheddar cheese. Cabot Creamery, which is packing a palette of cheddar cheese, is used as context to introduce the concepts of how external factors affect the cheese market.

Part a of the question asks the student to consider the impact on supply when the price of milk increases, causing a decrease in the supply of cheese. Here, students are expected to articulate and graph how an increase in production costs (i.e., higher milk prices) results in a leftward shift in the supply curve. Part b then transitions to address a change in demand due to a new health study. The response should involve the student graphing a 20% increase in demand at every price, leading to a rightward shift in the demand curve. Both of these exercises require the re-calculation and graphing of a new equilibrium price and quantity for cheddar cheese.