Thursday, February 12, 2015

Chocolate and Simultaneous Shifts in Demand and Supply----Happy Valentines Day!

Can you feel the love of supply and demand yet?

A very nice article in the New York Times that can be used for a basic supply and demand example showing the possible outcome with a simultaneous change in a determinant of Demand AND Supply. This is a common problem encountered in a basic economics class.
Valentine’s Day Chocolate Will Cost More This Year, as Cocoa Prices Rise

The article suggest that the price of chocolate will increase because of an increase in Demand from emerging Asian countries, primarily China,  and a decrease in Supply though a combination of bad weather and a fungi that has attacked the cocoa bean plants.

I put together some slides to illustrate these affects.  For the purposes of this lesson I am going to assume the magnitude of change in Demand and Supply are equal. In other words, the curves will shift accordingly by the exact same amount/percentage.

Any comments or corrections are appreciated.











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