Question
In: Economics
In each case below, identify the effect on the demand for ice cream. a. An increase...
In each case below, identify the effect on the demand for ice cream. a. An increase in the price of sorbet (substitute) b. An increase in the price of ice cream cones (complement) c. A decrease in consumer income d. A decrease in advertising by the producers of ice cream e. A decrease in population
Solutions
Expert Solution
a. An increase in the price of sorbet (substitute)
Answer There will be an increase in demand for ice cream as sorbet and ice cream are substitute goods. So, when price of sorbet rises, demand for sorbet falls and demand for ice cream rises.
b. An increase in the price of ice cream cones (complement)
Answer- Decrease in demand for ice cream as ice cream cones are expensive now, so ice cream is also expensive. So there is a fall in demand for ice cream.
c. A decrease in consumer income
Answer- Fall in demand for ice cream, when income falls demand for normal goods like ice cream falls.
d. A decrease in advertising by the producers of ice cream
Answer- Fall in demand for ice cream. More advertising means increased demand for ice cream. So fall in advertising means fall in demand for ice cream.
e. A decrease in population
Answer- Fall in demand for ice cream. Less population means less people to demand the icre cream.
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