1. For more than a century, milk producers have produced skim milk, which contains virtually no fat,...

Question

1. For more than a century, milk producers have produced skim milk, which contains virtually no fat, along with regular milk, which contains 4% fat. But a century ago, skim milk accounted for only about 1% of total production, and much of it was fed to hogs. Today, skim and other reduced-fat milks make up the bulk of milk sales. What curve shifted, and what factor shifted it?
2. Suppose firms in the economy were to produce fewer goods and services. How do you think this would affect household spending on goods and services? (Hint: Use the circular flow model to analyze this question.)

Robert · Accepted Answer

1. Consumers’ preferences have changed since the early 1990’s.  People are more health-
conscious and more concerned about fat.  Therefore, they have switched away from 
buying full-fat milk and are demanding skim milk in larger quantities.

1. For more than a century, milk producers have produced skim milk, which contains virtually no fat, along with regular milk, which contains 4% fat. But a century ago, skim milk accounted for only...

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