Which of the following options is correct? A decrease in the price of cocoa will most likely lead to a

Economics Dec 08, 2020

Which of the following options is correct?

A decrease in the price of cocoa will most likely lead to

a. an increase in the demand for chocolate.

b. an increase in the supply of chocolate.

c. a decrease in the supply of chocolate.

d. a decrease in the demand for chocolate.

Expert Solution

b. an increase in the supply of chocolate

Cocoa is used as an input in the production of chocolates. As a factor, it majorly impacts the supply side of chocolates in the market. Reduction in the price of cocoa would raise the profit margins of the producers. Hence, producers would find it beneficial to supply quantities of chocolates. The supply of chocolates would reflect an increment.

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