Question

Consider the market for ice cream . Using appropriate diagrams, explain how each of the following events will impact the equilibrium price and quantity of ice cream.

a. The population falls.

Answer 1

When the population falls, there is surplus of the ice-cream in the market and the sellers find their freezers increasingly full of ice-cream. They would want to sell but they are unable because of the reduced demand as a result of the reduced in demand due to fall in population. This way the sellers will reduce the prices to respond to surplus.