Table 1 sets out the demand and supply schedules for milk.

1. What is the equilibrium price and equilibrium quantity of milk?

2. Describe the situation in the milk market if the price were $1.75 a carton and explain how the market reaches equilibrium.

3. A drought decreases the quantity supplied by 45 cartons a day at each price.

What is the new equilibrium and how does the market adjust to it?

4. If milk becomes more popular and better feeds increase milk production, describe how the equilibrium price and quantity of milk will change.

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TABLE 1 Price (dollars per carton) 1.00 1.25 1.50 1.75 2.00 Quantity Quantity demanded supplied (cartons per day) 200 175 150 125 100 110 130 150 170 190