Final answer:
To analyze the market for cheddar cheese, we need to examine the demand and supply. The price of milk, a key input for cheese production, and a new study indicating the health benefits of cheese.
Step-by-step explanation:
To analyze the market for cheddar cheese, we need to examine the demand and supply. Let's assume that England and Spain can switch between producing cheese and bread at a constant rate. If the price of milk, a key input for cheese production, rises, the supply of cheese will decrease by 80 pounds at every price.
On the other hand, if a new study indicates that eating cheese is good for health, the demand for cheese will increase by 20% at every price. First, graph the original demand and supply curves and identify the equilibrium point. Then, create a table and graph for each of the following scenarios:
1) the price of milk rises, causing the supply of cheese to decrease by 80 pounds, and 2) a new study shows that eating cheese is beneficial, leading to a 20% increase in demand at every price.