Cole was discussing the market for cocoa beans with his friend John Schmidt. Cole said, "Ever since Venezuela announced that its cocoa harvest was its lowest ever in fifteen years, the price of cocoa beans has been rising and rising and people are buying
more and more. I think the demand for cocoa beans must be upward sloping." Is Cole right? Briefly explain why or why not.
What will be an ideal response?
Cole has confused a change in demand as s result of a change in the expected future price of cocoa beans with a change in price. Following the announcement of the poor harvest buyers expected that the price of cocoa beans would rise. In anticipation of higher prices in the future, demand increased; this led to a higher equilibrium price. As long as buyers believe that the price of cocoa beans will rise in the future they will increase their demand today.
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Which of the following is not one of the obstacles mentioned in the text to a successful system of price discrimination? Inability to
A) evade legal restrictions on discrimination. B) identify differences in demand among customers. C) prevent customers from reselling the product. D) prevent resentment from arising among the people who pay more.
The mutual interdependence of oligopolists ensures that each oligopolist has
A) a unique demand curve. B) a perfectly elastic demand curve. C) a reaction function. D) a fundamental dilemma about whether to collude or not.
Society is likely to over-allocate resources to produce goods that
A) are public goods. B) are merit goods. C) generate positive externalities. D) generate negative externalities.
The concept of laissez faire calls for government intervention if market failure is evident.
Answer the following statement true (T) or false (F)