MicroBites #1: Explaining Supply and Demand With Ice Cream

When summer rolls around, and the sun turns up the heat, what’s the first thing on your mind? Ice cream! But have you ever wondered why your favorite treat costs more during peak summer months or why the store sometimes runs out of your favorite flavor? It all comes down to the economic principles of supply and demand.

What is Supply and Demand?

Supply and Demand is the main concept that makes our economy work! It is the basis that raises prices, lowers prices and everything in between. In this EconBite, we will be explaining this concept with a sweet treat that everyone loves, Ice Cream!

The Demand Spike

On a blazing hot day, everyone wants ice cream, so the demand skyrockets. The local ice cream shop suddenly has a line out the door, but the supply—the number of ice creams in the freezer—remains the same. The ice cream man wants to make money, so when he sees that there are so many people that want ice cream, he’ll raise the cost because he knows that at least some of these people will still buy it. However, if there are barely any people in line, he might drop the price a little bit to get more people to buy his ice cream.

The Supply Side

Now let’s imagine the shop owners. They can’t instantly restock because producing and transporting ice cream takes time. When demand grows faster than supply, the price naturally goes up. This is why a cone that cost $3 in winter might jump to $5 in summer, because there is just not enough to go around for everyone that might want it.

Fun Twist: Flavor Inflation

Ever noticed that fancy flavors like pistachio or salted caramel are always pricier? That’s because they rely on ingredients that are rarer or harder to source, increasing the production cost. This cost gets passed on to us, the consumers. Since it is more costly, there could be less supply of those flavors, leading to the prices of them going up.

The Cool Conclusion

Next time you grab a scoop, remember you’re part of a mini economy where supply, demand, and prices all play a role. Ice cream isn’t just a treat, it’s an economics lesson in disguise!