Equilibrium Price and Quantity of Ice Cream Cones: Reflecting on Consumers' Income Changes

How will a decrease in consumers' income impact the equilibrium price and quantity of ice cream cones?

Will the equilibrium price and quantity of ice cream cones increase, decrease, or remain unchanged?

Answer:

If consumers' income decreases, the equilibrium price and quantity of ice cream cones will decrease if they are a normal good, and increase if they are an inferior good.

In the scenario where consumers’ income decreases, differentiate between how this scenario will affect equilibrium price and equilibrium quantity for ice cream cones which are a normal good as opposed to an inferior good. If ice cream cones are a normal good, meaning consumers buy more when their income increases, a decrease in income will lead to a decrease in demand. This decrease in demand will lead to a decrease in both the equilibrium price and quantity of ice cream cones.

On the other hand, if ice cream cones are an inferior good, meaning consumers buy more when their income decreases, a decrease in income will lead to an increase in demand. This increase in demand will lead to an increase in the equilibrium price and quantity of ice cream cones.