The figure shown above indicates the equilibrium price & quantity of ice cream in gallons per day in the year 2020. What could be the possible causes of the change in equilibrium price & quantity in the graph?

Question

BlackTom AI · Accepted Answer

A leftward shift of the demand curve reduces both equilibrium price and equilibrium quantity, so the observed change is best explained by a fall in demand. Relevant concepts: (1) Demand and supply curves show how price and quantity are determined; (2) A decrease in demand (demand curve shifts left) lowers equilibrium price and quantity; (3) A decrease in supply (supply curve shifts left) raises price and lowers quantity; (4) An increase in demand raises both price and quantity.

Step-by-step reasoning:
1. Identify the pattern in the graph: equilibrium price and equilibrium quantity both fall. That pattern matches the textbook effect of a decrease in demand (demand curve shifts left).
2. Consider how each answer choice would shift curves:
   - (a) Increased lockdown period: reduces people’s ability to buy certain goods (closure of stores, fewer trips out), lowering consumers’ effective demand for items like ice cream sold mainly through shops or parlors. This is a demand decrease -> price down, quantity down.
   - (b) Increased government cash handouts: raises consumers’ purchasing power, shifting demand right -> price up, quantity up (opposite pattern).
   - (c) Government instruction to close factories: reduces supply (supply curve shifts left) -> price up, quantity down (price would rise, not fall).
   - (d) Reduction in ice-cream-making technology (worse tech): reduces supply (leftward supply shift) -> price up, quantity down (again price would rise).
3. No numerical calculation is needed; the decisive test is the direction of price and quantity changes and the supply/demand shift each scenario implies.

Why (a) is correct:
- Only a decrease in demand produces simultaneous decreases in price and quantity. Increasing lockdowns reduce consumers’ willingness or ability to purchase ice cream from retail outlets, which plausibly shifts demand left and yields the observed fall in both equilibrium price and quantity.

Why the others are incorrect:
- (b) would increase demand (price and quantity up). (c) and (d) reduce supply, which raises price while lowering quantity — inconsistent with a price drop.

Conclusion: The correct option is a) The increase of lockdown period in November due to the covid-19, which matches the provided answer.

The figure shown above indicates the equilibrium price & quantity of ice cream in gallons per day in the year 2020. What could be the possible causes of the change in equilibrium price & quantity in the graph? Single choice

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