A study conducted on Yahoo! Revealed that chocolate is the most popular flavor of ice cream in America. For each of the following, indicate the possible effects on demand or supply, as well as changes in equilibrium price and quantity of chocolate ice cream. Part a provides an example answer.

a.A severe drought in the Midwest causes dairy farmers to reduce the number of milk-producing cattle in their herds by a third. These dairy farmers supply cream that is used to manufacture chocolate ice cream.

Solution: The reduction in amount of cream supplied is going to mean an increase int the market price of cream. This raises the raising the cost of an input to chocolate ice cream and there the cost of producing a unit of chocolate ice cream increases. This results in a leftward shift of the supply curve for chocolate ice cream as ice-cream producers reduce the quantity of chocolate ice cream supplied at any given price. Ultimately, this leads to a rise in the equilibrium price and a fall in the equilibrium quantity of chocolate ice cream.

b.A new report by the American Medical Association reveals that chocolate does, in fact, have significant health benefits.

c.The discovery of cheaper synthetic vanilla flavoring lowers the price of vanilla ice cream.

d.New technology for mixing and freezing ice cream lowers manufacturers' costs of producing chocolate ice cream.