Question

Cocoa is a key ingredient in making chocolate. Suppose there is a large drop in the production of cocoa because of a pest outbreak. What do you think will happen to the supply curve of chocolate in US?

a)

There will be a decrease in quantity demanded

b)

The change in supply will be uncertain

c)

There will be a movement along the supply curve

d)

There will be a shift of the supply curve to the left

Answer 1

A movement along a supply curve occurs when a change in quantity supplied is caused only by a change in price.

A shift to the left of the supply curve implies that the producer is supplying less quantity of chocolate at the same price.

Since there is a large drop in the production of Cocoa due to a pest outbreak, the quantity supplied of the chocolate will decrease.

Since the decrease in quantity supplied is due to a factor other than price, the supply curve will shift to the left.

d) There will be a shift of the supply curve to the left