Question

(Demand and Supply)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 (used to produce ice cream) increases.

Answer 1

Answer: Full answer in explanation below.

Explanation:

a. The price of dairy cow fodder increases.

Because the cow fodder increases, this will cause the overall cost to make ice cream to increase. This will thus increase the equilibrium price of ice cream. Supply will decrease, and quantity will decrease because it's more expensive to produce ice cream.

b. The price of beef decreases.

Cows can be used for dairy products or to make beef. In this case farmers are making dairy poducts instead of meat. Therefore supply of ice cream will increase quantity will increase leading to a decrease in equilibrium price.

c. Concerns arise about the fat content of ice cream. SImultaneously, the price of sugar (used to produce ice cream) increases.

The concern about the fat content will lead to a decrease in the demand for ice cream. On the other hand, an increase in the price of sugar will lead to an increase in the cost of making ice cream. Less ice cream will be produced as a result. A simultaneous decrease in both supply and demand exists. This makes the price indeterminable.