Question

Suppose you are analysing the market for two goods - ice-cream and coffee. (i)Illustrate and explain the impact each of the following would have on demand or supply of ice-cream. Also show how equilibrium price and quantity have changed. a. Cyclone Fani destroys part of the sugarcane crop and drives up the price of sugar b. Consumer income falls because of a recession and ice cream is considered a normal good. c. Producers expect the price of ice cream to increase next month. d. The price of frozen yogurt, a substitute for ice cream, falls. e. Covid-19 protocol restricts the timing of opening and closure of production units in the country.

Answer 1

In case of a and c there is a shift in supply curve, due to which price has increased and quantity has fallen.

In case of b and d there is a leftward shift in demand curve. Due to which there is fall in price and quantity both.

Hope this was helpful!!