Question

explain how the changes should impact Pe and Qe Classify as a change in demand or a change in quantity demanded, a change in supply or a change in quantity supplied. 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.

Answer 1

Change in quantity demanded occurs when the quantity demanded changes only due to the change in the price of the product whereas change in demand occurs when the quantity demanded changes due to change in factors other than the change in the price of the product such as change in income, change in tastes and preferences of the consumers, change in the prices of substitutes and complement goods, etc. When there is change in quantity demanded, there is movement up or down the demand curve and when there is change in demand, there is a shift right or left of the demand curve.

Since, there is increase in demand due to a positive change in taste and preferences of the consumers towards dark chocolate here, there would be a shift in the demand curve towards the rightward direction. Now, since supply is falling due to factors such as bad weather which is not related to price, there would be a shift of the supply curve towards the leftward direction.

In the diagram below, Pe is the equilibrium price, Qe is the equilibrium quantity, Pe' is the price and Qe' is the quantity after the change in demand and supply of dark chocolate. E is the equilibrium point before the change in demand and supply and E' is the equilibrium point after the change in demand and supply. Hence, Pe would increase and Qe would also increase. Note that here the decrease in supply < increase in demand, if the decrease in supply = increase in demand then Qe would remain unchanged, and if decrease in supply > increase in demand, then Qe would decrease.