Chapter 3, Problem 1P

To determine

A study conducted by Yahoo! Revealed that chocolate is the most popular flavor of ice cream in America. For each of the following, indicate the possible effects on demand, supply, or both as well as equilibrium price and quantity of chocolate ice cream.

1. A severe drought in the Midwest causes dairy farmers to reduce the number of milk-producing cattle in their herbs by a third. There dairy farmers supply cream that is used to manufacture chocolate ice cream.
2. A new report by the American Medical Association reveals that chocolate does, in fact, have significant health benefits.
3. The discovery of cheaper synthetic vanilla flavoring lowers the price of vanilla ice cream.
4. New technology for mixing and freezing ice cream lowers manufacturers’ cost of producing chocolate ice cream.

Concept Introduction:

Demand: The demand is defined as the ability to pay for goods and services.

Supply: The supply is the ability of the seller to produce the goods and services and sell it at the prevailing price.

Equilibrium price: The equilibrium price is at which the demand and supply are equal.