Question

Suppose we are analyzing the market for hot chocolate. Graphically illustrate the impact each of the following would have on demand or supply. Also show how equilibrium price and equilibrium quantity would change. a. Winter starts, and the weather turns sharply colder. b. The price of tea, a substitute for hot chocolate, falls

Answer 1

a) the demand for hot chocolate will increase and so is the price and quantity consumed.

b) in this case the demand for hot chocolate will decline because the demand for tea will increase.
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