Answer to Question #92299 in Economics for Baljit

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 right? Briefly explain why or why not.

Answer 1

John isn't right, because there is a change in expectations, as a result demand for cocoa will rise, so both price and quantity demanded will rise.