Assume the supply function of ice cream is written as: Qs = 100 + 20P - 10Pm,where Qs is the quantity supplied,P is price of ice cream,and Pm is the price of milk ($/gallon).If milk price increases by $2/gallon due to the policy change,how will the Qs change?
A)decreases by 20
B)increases by 20
C)decreases by 10
D)increases by 10

Question

Quizplus · Accepted Answer

Given the supply function Qs = 100 + 20P - 10Pm, an increase in the price of milk (Pm) by $2/gallon would result in a decrease in Qs by 20 units (10 * 2 = 20), reflecting the negative relationship between the price of milk and the quantity of ice cream supplied.

Assume the Supply Function of Ice Cream Is Written As