00:01
Here we're told to analyze the market for chocolate milk.
00:03
So let's analyze the market for chocolate milk.
00:06
A market is a quantity and price space where demand is sloping down and supply is sloping up.
00:15
Look something like this, right? and we're told there's a shock, right? the shock here is that the price of milk falls.
00:23
Price of milk falls.
00:27
So we're also told that these are substitutes.
00:35
So let's figure out what that means for the demand for chocolate milk.
00:40
So if the price of milk is going to go down, this means by the law of demand, we should expect that the quantity of milk consumed should rise, right? we are expecting a higher quantity of milk.
00:56
So these are substitutes.
00:59
So more milk substitutes for chocolate milk, right? people are buying more milk to take advantage of the lower price.
01:13
But now that that means they have more milk.
01:17
And when they have more milk, since it's substituting for chocolate milk, they are less willing to buy chocolate milk.
01:24
Right...