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Some studies have shown that eating chocolate before a test can increase brain activity, thereby causing students to score higher in the examination
Some studies have shown that eating chocolate before a test can increase brain activity, thereby causing students to score higher in the examination. At the time of the release of these studies the major cocoa producing countries are all experiencing severe dry periods as a result of the El Nino effect. What is the likely outcome of this scenario on the market for chocolates?
1) A higher equilibrium price but the equilibrium quantity could either increase, decrease or stay the same,
2) A higher equilibrium quantity but the equilibrium price could either increase, decrease or stay the same,
3) A lower equilibrium quantity but the equilibrium price could either increase or stay the same,
4) Both the equilibrium price and equilibrium quantity will decrease.
Expert Solution
The likely outcome of this scenario on the market for chocolates 1) a higher equilibrium price but the equilibrium quantity could increase, decrease or stay the same
Explanation:
In normal market conditions, the equilibrium price is where the chocolate demands meet the supply in the market curve and there are no entry or exit barriers
The following economic conditions are prevailing
- The demand for chocolate increases during the exam time as it beneficial to students in scoring high marks
- The production of supply is affected due to El Nino effect
The demand is more than production and supply due reduction in production in chocolate the equilibrium price will be higher than normal market conditions, and the equilibrium quantity can decrease due to drought, or increase due to lower demand from students than in normal market conditions, or equal due to same increase in demand and decrease in supply
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