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Principles of Economics 2e

2nd Edition
Steven A. Greenlaw; David Shapiro
ISBN: 9781947172364

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BuyFindarrow_forward

Principles of Economics 2e

2nd Edition
Steven A. Greenlaw; David Shapiro
ISBN: 9781947172364
Textbook Problem

What happens to the price and the quantity bought and sold in the cocoa market if counties producing cocoa experience a drought and a new study is released demonstrating the health benefits of cocoa? Illustrate your answer with a demand and supply graph.

To determine

Impact on the market for cocoa if there is a drought in cocoa producing countries and new study is released which shows the health benefits of cocoa.

Explanation

In the below diagram, initial equilibrium price is P and quantity is Q. The equilibrium is at point E.

When there is a drought in cocoa producing countries, the supply of cocoa falls. As a result the supply of cocoa shifts leftward from S to S’. On the demand side, due to the releasing of a report which shows the benefits of eating cocoa on health will increase the demand for cocoa...

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