Question

In: Economics

According to text i need to fill this graph which one is increasing which one is...

According to text i need to fill this graph which one is increasing which one is decreasing

Graph #

Graph Name

Pe

Q

∆ in D

∆ in Qd

∆ in S

∆ Qs

Consumer Shift to Dark Chocolate Further Squeezing Cocoa Supplies

Consumers from California to Switzerland are developing a taste for dark chocolate, taking a bite out of global cocoa supplies and driving up candy prices in both high-end boutiques and mass-market drugstores. Prices are on the rise due to a shortage of cocoa beans, which are roasted and ground to make chocolate. Market experts estimate that supplies will fall this year for the first time, dry weather is expected to hurt the next harvest in West Africa, where 70% of cocoa beans are produced. The supply shortfall is emerging just as Americans and Europeans are buying more chocolate, particularly the darker varieties, for both health and economic reasons. Dark chocolate often requires more cocoa beans per ounce than milk chocolate, which means that even small shifts in buying trends can have a big impact on the $5.4 billion cocoa-futures market, traders and investors say.

Solutions

Expert Solution

Consumers are developing a taste for dark chocolate and thus increasing their demand for chocolate. When the demand increases, the demand curve shifts towards the rightward direction. In the graph below the original demand curve was DD and after the increase in demand it shifted towards the rightward direction to D'D'. Since, there is shortage of cocoa beans and since dry weather where 70% of cocoa beans are produced is expected to have a further effect on the supply, the supply is going to decrease. In the graph below the original supply curve is SS and after the shortage of supply the supply curve shifted towards the leftward direction to S'S'. Due to the decrease in supply, and the increase in demand, we see in the graph that the equilibrium price rose from PE to P' and the equilibrium quantity decreased from QE to Q'.

Summarizing,

Graph #
Graph Name The Chocolate Industry
Pe Increase
Q Decrease
∆ in D Increase
∆ in Qd Increase
∆ in S Decrease
∆ Qs Decrease

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