Answer to Question #221537 in Microeconomics for priya

Question

John was discussing the market for cocoa beans with his friend Kim. John 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 John’s reasoning correct? Explain why or why not.

Answer 1

John is correct based on the fact that people may be needing stock of beans at their home. However, considering their low harvest, this forces them to go to the market to look for more. At this situation, the demand for beans goes upwards as it increases with time.