Question

use the traditional model of supply and demand to explain how an increase in the price of ice-cream would affect the price of frozen yogurt and the quantity of ice cream sold in the market. In your explanation, identify the exogenous and endogenous variables.

Answer 1

Answer:

Endogenous variable - frozen yogurt

exogenous - ice cream

If ice cream become more expensive the demand for ice cream would fall and consumers would shift to the consumption of frozen yogurt which is cheaper. This changes are in line with the law of demand. According to the law of demand, the higher the price, the lower the quantity demanded and the lower the price, the higher the quantity demanded. According to the law of demand, the higher the price, the lower the quantity demanded and the lower the price, the higher the quantity demanded.

There would be a rightward shift of the demand curve for frozen yogurt equilibrium price and quantity of frozen yogurt would increase would increase

Explanation:

Frozen yogurt is a substitute for ice cream.

Substitute goods are goods that can be used in place of another good