1
$\begingroup$

I am a newbie at economics and would appreciate help from the community.

Question

Use the model of supply and demand to explain how a fall in the price of frozen yogurt would affect the price of ice cream and the quantity of ice cream sold. In your explanation, identify the exogenous and endogenous variables.

My Answer

A fall in prices should cause the supply of the frozen yogurt to increase so a higher quantity of frozen yogurt demanded at a lower price. Here I assume supply curve shifts to the right and demand curve doesn't change.

The fall in yogurt prices should cause demand for ice-cream to decrease(here i assume that they are somewhat replaceable), do the demand curve should shift to the left and cause lower quantity of ice-cream to be demanded at a lower price.

Is my analyis correct or did I miss something or I can improve it in some way.

$\endgroup$
  • 1
    $\begingroup$ As you are a newbie, my advice is simple: Economics is all about common sense and analytical skills. Your answer makes sense, so there's no need to rely on us. Note that "replaceable" goods are referred as "substitutes", while cups are referred as complements. $\endgroup$ – Commissar Vasili Karlovic Feb 8 '18 at 9:29
  • $\begingroup$ Thanks for verifying it. I am not at a stage where I can recognize the right answer even if come up with it. Feedback helps me solidify my understanding faster. $\endgroup$ – Piyush Divyanakar Feb 8 '18 at 9:33

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Browse other questions tagged or ask your own question.