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 closureof production
units in the country.

Answer 1

Ice cream market is equilibrium where demand curve for ice cream and supply curve of ice cream intersects at Pi level of price and Qi level quantity of ice cream.  
Initially coffee market was equilibrium where demand curve for coffee and supply curve intetsects at Pc level of price and Qc level of output.
a. Cyclone Fani destroys part of the sugarcane and drives up the price of sugar. Sugar is an input for the production of ice cream and coffee. So rise in sugar increase the cost of production of both ice cream and coffee. It will shift supply curve leftward and increase the price of ice cream into Pi* and reduce the quantity supply into Qi*. It also shift the supply curve of coffe leftward and increase the price of coffee into Pc* and reduce quantity of supply into Qc*
b. When consumer income falls, demand for ice cream declines and demand curve shift backward and consumption of ice cream reduces to Qi*
c.when producers expect the price of ice cream increase next month. It will shift the supply curve left and price increased to Pi* and reduce quantity of ice cream into Qi*
d. When the price of yogurt (substitute for ice cream) falls, demand for ice cream falls. Demand curve for ice cream shift backward and consunptiom of ice cream reduces to Qi*
e. Covid -19 protocol restricts the timing of opening and closure of production units. It will reduce quantity of both ice cream and coffee and its supply curve shift leftward. It will reduce the supply of coffee into Qc* and Qi*level of icecream and increase the price of both ice cream into Pi*and price of coffee into Pc*