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

ANS

Yes , the market are the good way to organize the economic activity as the market gives support to the players who act as an invisible hand in the market. When the economic activity is held in teh market then teh government also plays a vital role in the production of the desirable outcome in the market. With the rise of globalization the markets has become a vital source of the organization of economic activity. The decisions in the market are decentralized and the decisions are taken with respect to the demand and supply of the economy. The two real world situations where government intervened in a market economy to improve the market performance are in 1991 in India when the market was not doing well and there was shortage of goods and services also the industrial sector was potraying poor performance then the government intervened and introduced new policy named liberalization, privatization and globalization and invited foreign companies in the indian economy to invest for the first time after independence, The other scenario is in the 2020 in India when the maeket was hit by the effects of corona virus pandemic the government lowered the tax rates and also it waved off the interest on the specific loans for a certain time period.