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 e. A better method of harvesting cocoa beans is introduced f. The Surgeon General of the U.S. announces that hot chocolate cures acne.

Answer 1

e) When the better technology is available then more goods can be produced as a result supply curve will shift rightward. As a result equilibrium price will decrease whereas, the quantity of hot cholclcho will increase.

f) when it will be announced that hot chocolate cures the acne people will start consuming higher quantity of hot chocolate. Thus, equilibrium price and quantity both will increase in the market. The presentation is shown in diagram below.