What happens to the equilibrium price and quantity of ice cream in response to each of the following? (Explain your answers).
a. The price of dairy cow fodder increases.
b. The price of beef decreases.
c. Concerns arise about the fat content of ice cream. Simultaneously, the price of sugar (use3d to produce ice cream) Increases.
increase
a. When the price of dairy cow fodder increases, it leads to increased costs of production for ice cream manufacturers. As a result, the supply curve of ice cream shifts to the left, indicating a decrease in the quantity supplied at every price level. This reduction in supply causes the equilibrium price to rise, as there is now less ice cream available in the market. Additionally, the equilibrium quantity of ice cream decreases since less is being supplied by manufacturers.
b. When the price of beef decreases, it can have an indirect effect on the ice cream market. Lower beef prices mean that beef becomes relatively cheaper compared to other goods, including substitutes for ice cream like hamburgers. This could lead to an increase in demand for beef, which might in turn lead to a decrease in the demand for ice cream. As a result, the demand curve for ice cream shifts to the left, resulting in a lower equilibrium price and quantity of ice cream.
c. If concerns arise about the fat content of ice cream, consumers may reduce their demand for ice cream and look for healthier alternatives. This shift in consumer preferences will cause the demand curve for ice cream to shift to the left, leading to a decrease in both the equilibrium price and quantity of ice cream. Additionally, if the price of sugar used to produce ice cream increases, it can further reduce the supply of ice cream, shifting the supply curve to the left. This again leads to a higher equilibrium price and lower equilibrium quantity of ice cream.