Figure 3-7 in Figure 3-7, Suppose D₁ and S₁

question 2

Multiple Choice

Figure 3-7 In Figure 3-7, suppose D₁ and S₁ indicate the initial conditions in the market for ice cream. Which of the following changes would tend to cause the shift from D₁ to D₂ in the market for ice cream?

• A) a decrease in the price of sugar, an ingredient used to produce ice cream
• B) an increase in the price of frozen yogurt, a substitute for ice cream
• C) abnormally cold weather that decreased consumer desire for ice cream
• D) an increase in the price of milk, an ingredient used to produce ice cream

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Definitions:

Monetary System

A structured system for creating, managing, and distributing money in an economy.

Barter Economy

An economic system in which goods and services are exchanged directly for other goods and services without the use of money.

Efficient Price

A market condition where prices reflect all available information and resources are allocated to their most valuable use.

Efficient Quantity

The level of output where the marginal benefit to consumers equals the marginal cost of producing an additional unit, leading to optimal resource allocation.