While the world's appetite for chocolate grows more voracious each year, cocoa farms around the globe are failing, under siege from fungal and viral diseases and insects... Researchers predict a shortfall in beans from the cacao tree, the raw material from which chocolate is made, in as little as five to ten years."
Given the information in the news clip, what is the effect on the equilibrium price and equilibrium quantity of chocolate?
The effect on the equilibrium price and equilibrium quantity of chocolate will depend on the magnitude of the shortfall in cacao beans and the elasticity of demand for chocolate.
If the shortfall in cacao beans is significant and there is inelastic demand for chocolate (meaning that consumers are not highly responsive to changes in price), then we can expect an increase in the equilibrium price of chocolate and a decrease in the equilibrium quantity.
On the other hand, if the shortfall in cacao beans is relatively small and there is elastic demand for chocolate (meaning that consumers are highly responsive to changes in price), then we may see a smaller increase in the equilibrium price of chocolate and a more moderate decrease in the equilibrium quantity.
Ultimately, the equilibrium price and quantity of chocolate will adjust in response to the imbalance between supply and demand caused by the shortage of cacao beans.
Based on the information provided, the effect on the equilibrium price and quantity of chocolate would likely be an increase in price and a decrease in quantity.
Since cocoa farms are failing due to various diseases and insects, the supply of cocoa beans, which are the raw material for chocolate production, would decrease. This decrease in supply would cause the supply curve to shift to the left.
As a result, the equilibrium price of chocolate would increase because there would be less supply available at the existing equilibrium quantity. Consumers would have to pay a higher price to acquire the limited available chocolate.
Additionally, with a decrease in the supply of cocoa beans, the equilibrium quantity of chocolate would also decrease. This means that there would be less chocolate available in the market for consumers to purchase.
Overall, the combination of a decrease in supply and an increase in price would lead to a decrease in the quantity of chocolate available in the market.
The information in the news clip suggests that there is a growing problem in the cocoa industry, with cocoa farms facing challenges from diseases, insects, and other factors. This situation could potentially lead to a decrease in the supply of cocoa beans, which are the raw material used to make chocolate.
When there is a decrease in the supply of a product, it typically results in an increase in the equilibrium price and a decrease in the equilibrium quantity. This is because there are fewer goods available in the market, but the demand for chocolate remains high. As a result, consumers are likely to compete for the limited supply, driving up prices.
In the case of chocolate, if there is a shortfall in cocoa beans, chocolate producers may have to increase their prices in order to cover the higher costs of acquiring cocoa or to compensate for the decrease in supply. This increase in price will likely result in a lower quantity of chocolate being demanded by consumers, as some people may find it too expensive or switch to alternative products.
However, it's important to note that the actual impact on equilibrium price and quantity will depend on several factors, including the elasticity of demand for chocolate, the availability of substitutes, and the ability of producers to find alternatives or adapt to the changing conditions in the cocoa industry.