Question

Use the supply and demand model to illustrate how each of the following affects the market for cocoa beans, ceteris paribus. Briefly discuss, and state the change in price and quantity. a. A blight on cacao trees kills of much of the crop in Latin America. b. The price of carob increases. c. Workers organize into a union and get higher wages for farming Cocoa. d. Chocolate is clinically proven to prevent Alzheimer’s disease. e. The price cocoa beans are expected to drop in the near future.

Answer 1

a) As the crop is destroyed it will decrease the supply and at a lower supply the price will increase and the demand will fall in the market.

b) As it is the substitute for the chocolate, an increase in the price of the good will increase the demand for the cocoa bean and the it will increase the price and the quantity of the cocoa.

c) It will increase the input cost and with a higher input cost the supply price will increase, It will increase the price and reduce the quantity in the market.

d) it will increase the demand for the good and increase the quantity and price of the cocoa in the market.

e) as the price is expected to drop it will increase the supply in the present market and at a higher supply the price will drop and the quantity will increase.