Answer to Question #237145 in Microeconomics for OK MOLEFE

Question

    Explain the effect on the production of ice cream if the price of raw milk decreases. Also, show the effect on the graph.

Answer 1

As the price of raw milk tends to decrease, the production cost for ice cream similarly decreases . Therefore, the retained amount of money that could be utilized in purchasing milk would be used in either increasing the stock or enhancing the production process. Hence, there will be an increase in the production of ice cream.