HI5003 Economics Report: Factors Influencing Dairy Supply and Demand

This report provides an analysis of the factors influencing the supply of products for Dairy Farmers Pty Ltd, focusing on milk as their core product. It examines the impact of various elements, including price fluctuations, natural conditions such as climate, cost of production, and transport conditions, on the overall supply chain. The report also explores demand elasticity, differentiating between elastic and inelastic demands for various dairy products like butter, cheese, and other renewed dairy products. It further discusses influences on demand elasticity, such as the nature of the commodity and the availability of substitutes. The analysis is based on the context of the Australian dairy market, where the industry is competitive, and the government plays a significant role in regulating prices. The report references several academic sources to support its findings and provides a comprehensive overview of the economic dynamics affecting the supply and demand of Dairy Farmers Pty Ltd's products.

HI5004

Factors influences supply of company product and elasticity
The company selected in this assignment is the Dairy farmers Pty Ltd which supply their
products in the various states of Australia. The core product of this company is milk. The supply
of the products is the main part of the company and it manages the overall profits of the company
(Altarawneh, 2015). The core product of the company is milk. The supply needs to manage
properly in the organization for the better profitability of the overall organization. There are
various aspects that affect the supply of the products related to dairy industry. Some of the main
features that affect the supply are designated below-
 Price
This is the foremost aspect that impacts the overall supply of the product as there are
direct association between the price of product and the supply. As if the price of the
product upsurges, the supply of the product also upsurges and vice versa (Lemma, et al.,
2015). The Dairy Farmers Pty Ltd is affected by the price feature as the milk price gets
fluctuates due to the different conditions. The company price gets changes as per the
requirements of the product.
 Natural Conditions
The natural conditions are also important influence that affect the supply of the product.
As due to natural conditions sometimes the supply increases and sometimes supply
decreases. The temperatures of Australia is increased in a dramatic way since 1910 and
nights become warmer. These climatic conditions affect the supply of the milk connected
to the business of Dairy Farmers Pty Ltd. The supply needs to manage by the company
as per the climatic conditions. For instance, the supply of agricultural products upsurges
when monsoon comes on time. The dairy products is also affected by the climatic
conditions (Daud, et al., 2015) The Dairy farmer Pty Ltd manages their supply as per the
natural conditions.
 Cost of production
It has been determined that supply of product decline with the upsurge in the charge of
production and vice versa. As the product supply and production cost are contrariwise
connected with each other. For instance, the supply of product decreased by seller if the

cost of production is increases. The cost of production is the price included in making
the products in a proper manner. The example of cost of production is the Dairy Farmers
Pty Ltd that they include several cost of production in the overall process. The price of
the dairy products are fluctuating in the overall system which affect the overall supply of
the products.
 Transport conditions
Transport is an important factor in the overall supply of the product as the transport
process is used to supply the products in the market. So the company needs to manages
the overall transport conditions by maintain the supply of the products. The better
facilities of transport increases the source of the product as the availability is pretentious
by the poor facilities of transport. This is my own perspectives that Dairy Farmer’s
company is greatly affected by the transport conditions which gets impacted as per the
needs and demands of the transport workers.
Demand Elasticity
The demand elasticity of the products refers to how subtle the demand for a good is to variations
the economic variables. Demand elasticity is measured as the percent variation in the quantity
demanded separated by the percent change in some other variable of economic (Gulseven and
Wohlgenant, 2017). As per the analysis, it has been determined that demand for the dairy
products is inelastic because it affects the overall production of milk in greater quantity. As the
demand for butter is less elastic and the demand for renewed dairy products and cheese are
elastic in nature. The elasticity of the demand is very different in the dairy products. There are
various influences that affect the demand elasticity of the dairy products. The major influences
included in the elasticity are described below-
 Nature of commodity
Demand elasticity is the commodity is prejudiced by its nature. A product for a person
may be requirement, ease or luxury. It the commodity is a requirement the demand is
inelastic and demand does not changes as per the price (Lichter, et al., 2015). When the
commodity is ease the demand is elastic in nature and when commodity is luxury, the
demand is elastic.

 Obtainability of substitutes
Demand for product along with the substitutes that have large number is elastic in nature.
The minor rise in prices affect the purchasers for its substitutes. The dairy products are
greatly affected by the availability of substitutes (Koffamus, et al., 2015). As the
substitures taken the place of actual product. The availability of substitutes that are close
in nature makes the demand sensitive for the change in prices.

References
Altarawneh, M., 2015. Estimating supply and demand functions for dairy cows milk
production. Asian Journal of Agricultural Extension, Economics & Sociology, pp.1-5.
Daud, A.R., Putro, U.S. and Basri, M.H., 2015. Risks in milk supply chain; a preliminary
analysis on smallholder dairy production. Livestock Research for Rural Development, 27(7),
pp.1-14.
Gulseven, O. and Wohlgenant, M., 2017. What are the factors affecting the consumers’ milk
choices?. Agricultural Economics, 63(6), pp.271-282.
Koffarnus, M.N., Franck, C.T., Stein, J.S. and Bickel, W.K., 2015. A modified exponential
behavioral economic demand model to better describe consumption data. Experimental and
Clinical Psychopharmacology, 23(6), p.504.and
Lemma, H.R., Singh, R. and Kaur, N., 2015. Determinants of supply chain coordination of milk
and dairy industries in Ethiopia: a case of Addis Ababa and its surroundings. SpringerPlus, 4(1),
p.498.
Lichter, A., Peichl, A. and Siegloch, S., 2015. The own-wage elasticity of labor demand: A meta-
regression analysis. European Economic Review, 80, pp.94-119.