Milk prices set to rise Source:www.hindustantimes.com Less than a month since a tariff hike, milk prices are set to rise by at least Rs 2 for each litre from this week. The price hike comes against the backdrop of the state facing a shortage of milk owing to decrease in production and farmers preferring to sell their existing produce at higher rates.According to Arun Narke, director, Gokul, which supplies approximately eight lakh litres of milk to Mumbai, they will have to pay farmers more to procure milk. "We plan to increase the procurement price for milk by Rs 2 for each litre. This would be paid to the farmer and this hike will be passed on to the consumer," said Narke. Gokul, which used to receive 13 lakh litres milk daily from farmers, has been getting 11.50 lakh litres since the past few days, and they will be now forced to shell out more to make up for the shortfall. Currently, the companies producing powdered and skimmed milk are also facing a shortage of milk. Mumbai needs around 80 lakh litres of milk daily, a major portion of which : 35 lakh litres is sold as loose milk. Of the remaining 45 lakh litres, 15 lakh litres are supplied by Amul, eight lakh by Gokul and two lakh litres each by Nandini and Mahanand.Anand Gorad, president of Agri Dairy and Food Industry Forum, said "it was both the high cost of procurement as well as hike in price of raw materials, which was responsible for this stalemate. First it was the deluge in the milk-producing belt of Kolhapur, Sangli and Miraj in August 2018, which destroyed the whole dairy infrastructure. After that the unseasonal rains at the end of last year made things worse," said Gorad. He added that farmers cannot be blamed as they have suffered enough losses.

Read the above and answer the following questions.

All questions carry equal marks.

Attach diagram only in pdf format.

a. Is the demand for milk elastic or inelastic? Justify your answer with suitable economic rationale?

b. In view of the elasticity and the price hike, what would be the impact on the revenues? Justify your answer with suitable economic rationale.

c. With the increase in raw material prices for the farmers has the supply curve for milk shifted? Explain the shift with the help of a diagram.