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Unformatted text preview: sugar (an
input) causes sellers to
supply less ice cram.
The supply curve shifts
from S1 to S2, which
causes the equilibrium
price of ice cream to
Ice- rise from $2 to $2.5
Cream Cones and the equilibrium
quantity to fall from 7
to 4 cones.
A Change in Both Supply and Demand
1. 2. 3. Both curves must shift. The hot weather affects the demand curve because it alter the amount of ice cream that household want to buy at any given price. At the same time, when the hurricane drives up sugar prices, it alter the supply curve for ice cream because it changes the amount of ice cream that firms want to sell at any given price.
The curves shifts in the same directions as they did in our previous analysis. The demand curves shifts to the right, and the supply curve shifts to the left.
In both cases, the equilibrium price rises. Thus, these events certainly raise the price of ice cream, but their impact on the amount of ice cream sold is ambiguous. A Shift in Both Supply and Demand
Here we observe a simultaneous increase in demand and decrease
in supply. Two outcomes are possible. In panel (a), the equilibrium
price rises from P1 to P2, and the...
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- Summer '11