Question

Price D₂ Quantity of Ice Cream In Figure 3-7, suppose D, and Sı indicate the initial conditions in the market for ice cream. Which of the following changes would tend to cause the shift from Dito D2 in the market for ice cream? O a, a decrease in the price of sugar, an ingredient used to produce ice cream O b. an increase in the price of frozen yogurt, a substitute for ice cream c. abnormally cold weather that decreased consumer desire for ice cream O d. an increase in the price of milk, an ingredient used to produce ice cream

Answer 1

The shift from D1 to D2 happens only when there is an increase in demand patterns.

For options 3 and 4, the effect would be just the opposite i.e. the decrease in demand which is not the case here. So, these options are not correct. For option-1, demand will increase for the price drop but the movement will be along the line D1 i.e. the equilibrium point will shift towards the downward direction along D1 but the demand curve will not change resulting in the supply curve change only.

Option-2 is correct.

Note that in this case the price of a substitute good increases. This will change the consumption pattern of this ice cream and shift (increase) the demand towards the right side i.e. from D1 to D2.