ECON-81-Unit 1 & 2
3 Questions and Answers
A survey indicated that chocolate ice cream is America’s favorite ice cream flavor. For each of the following, indicate the possible effects on he demand and/or supply, equilibrium price, and equilibrium quantity of chocolate ice cream. * A sever drought in the Midwest causes dairy farmers to reduce the number of milk- producing cows in their herds by a third. These dairy farmers supply cream that is used to manufacture chocolate ice cream?
By reducing the number of milk-producing cows in famer’s herds, supply will fall. A shortage of cream now exists and the market is no longer in equilibrium. The price of chocolate ice cream is higher and the equilibrium quantity is lower.
* A new report by the American medical Association reveals that chocolate does, in fact, have significant health benefits?
The report would increase the demand for chocolate, but would not affect the supply.
* The discovery of cheaper synthetic vanilla flavoring lowers the price of vanilla ice cream? The technological innovation of synthetic vanilla flavoring causes a rightward shift in the supply of vanilla ice cream and as a result the equilibrium price of vanilla ice cream made from vanilla flavoring has fallen and the equilibrium quality bought and sold has risen.
The market for many goods changes in predictable ways according to the times of years, in response to events such as holidays, vacations times, seasonal changes in production, and so on. Using supply and demand, explain the changes in price in each of the following cases.
* Lobster prices usually fall during the summer peak harvest season. Despite the fact that people like to eat lobster during the summer months more than during any other time of the year? The quantity of lobster supplied is higher at any given price and the supply increases, which shift the supply curve to the right and the equilibrium price