The commercial fridges used to keep ice cream cold become more expensive and, at the same time, the price of frozen yoghurt (a substitute of ice cream) falls. The equilibrium price and the equilibrium quantity .
Question
The commercial fridges used to keep ice cream cold become more expensive and, at the same time, the price of frozen yoghurt (a substitute of ice cream) falls. The equilibrium price and the equilibrium quantity .
Solution
The question seems to be asking about the impact of these changes on the equilibrium price and quantity of ice cream. Here's a step-by-step analysis:
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Increase in cost of commercial fridges: This would increase the cost of production for ice cream. According to the law of supply, if the cost of production increases, the supply decreases. This would shift the supply curve for ice cream to the left.
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Decrease in price of frozen yoghurt: Since frozen yoghurt is a substitute for ice cream, a decrease in its price would make it more attractive to consumers. This would decrease the demand for ice cream, shifting the demand curve for ice cream to the left.
So, with both the supply and demand curves for ice cream shifting to the left, the equilibrium quantity of ice cream would decrease.
However, the impact on the equilibrium price is uncertain without more information. The decrease in demand would put downward pressure on the price, while the decrease in supply would put upward pressure on the price. The actual change in price would depend on the relative magnitudes of these shifts. If the shift in supply is larger than the shift in demand, the price would increase, and vice versa.
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