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Q2: Using the extract above (you may include other relevant economic concepts), describe the demand and supply factors that you will consider when you set up a Yoghurt Ice cream stall at AMK.

scarcity

Consumers perspective

Unlimited wants

Consumers want both the normal ice cream and yogurt ice cream

Limited resources

Due to limited money, usually consumers would only purchase one type of ice cream.

Demand

Non-Price determinant of demand

income

Inferior good

Since the income of Singaporeans is expected to increase, they would turn away from the inferior goods and instead start demanding for the normal and more superior goods. Hence, the demand of inferior ice cream will decrease.

Normal good

As the income of Singaporeans will be higher in the year 2012, they will be more willing to demand for more of the ice cream. Hence, demand of the ice craeam will increase.

Tastes and preferences

Consumers who are more health conscious may prefer yoghurt ice cream as it is a healthier alternative to ice cream, and yoghurt ice cream reduces the possibility of getting high blood pressure. Hence, the demand for ice cream will increase.

Price of related goods

Complementary goods (goods in joint demand)

Such as ice cream and ice cream cones

Substitutes (Goods in competitive demand)

Due to the presence of the 3 different competitors, all of which sells ice cream which can satisfy the same wants of consumers, a increase or decrease in prices of any of the 3 competitors will affect the quantity demanded of our store.

Price determinant of demand

Price of good itself

I will need to consider the price of the yogurt itself to ensure that quantity demanded by consumers will generate sufficient revenue to ensure that the total profit will increase, assuming total cost remains constant (Total profit = Total revenue - Total cost )

Opportunity cost

Consumer's perspective

If the yoghurt ice cream is bought, the next best alternative is forgone, in this case the normal ice cream

supply

Non -price determinant of supply

Producers' expectations of Prices

Since the price of Milk, one of the factors of production for the ice cream, is expected to increase, i may decide to supply more of it presently since it is cheaper to do so.

Natural factors

Mad cow diseases, less cow thus less milk produced.Bad weather conditions affects supply of agricultural products which are needed to make yogurt ice cream’s flavors

Prices of related products

The main ingredient of yogurt ice cream is milk.When price of beef increases, quantity supplied of beef will increase. The supply of milk with a lower price will fall. This is because producers want to generate more revenue from beef which has a higher price.With a lower supply of milk, it will not meet the demand for milk. Then the price of milk will then increase.

Cost of production

Since milk, one for the raw materials used in the production of yogurt experiences an increase in price. Producers will cut back on production of yogurt, hance leading to a lower quantity supply.

Price determinant of supply

Price of the product

More quantity will be supplied since the price of the product will increase due to the increase in the price of the milk. Hence producers may want to generate more revenue by increasing quantity supply.