\"Please answer the follow Question in full\" Suppose we are analyzing the marke
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"Please answer the follow Question in full"
Suppose we are analyzing the market for hot chocolate. For each off the events listed here, identify which of the determinants of demand or supply is affected. Also indicated whether demand or supply is increased or decreased. Then show the effect on the price and quantity of hot chocolate. (To make life easy, assume that only one side of the market is affected: either the demand side or the supply side but not both. No graph is needed.) Winter starts and the weather turns sharply colder. The price of tea, a substitute for hot chocolate, falls. The price of cocoa beans decreases. The price of whipped cream falls. A better method of harvesting cocoa beans is introduced. The Surgeon General of the U.S. announces that hot chocolate cures acne. Protesting farmers dump millions of gallons of milk, causing the price of milk to rise. Consumer income falls because of a recession, and hot chocolate is considered a normal good. Producers expect the price of hot chocolate to increase next month. Currently, the price of hot chocolate is $0.50 per cup above equilibrium.Explanation / Answer
a. Demand increases - more popular time to buy
b. Demand decreases - substitute good
c. Supply increases - can get more for less money
d. Demand increases - complimentary good
e. Supply increases - can get more beans faster
f. Demand increases - health benefits
g. Demand decreases - complimentary good
h. Demand decreases - people won't buy
i. Demand increases - if it will be more expensive in the future, people will stock up now
j. Demand decreases - to get to equilibrium demand will lower
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