Question

The podcast starts with a discussion of the market for pistachios. Draw a S&D graph that shows the situation described in this paragraph:

"The reason for this is both supply and demand. The demand part is that people are eating more nuts. People in China and India are discovering them, and so there's a much bigger market for nuts. But the supply side is also important. The reason why they can make so much money off of these crops is because of the drought. The drought has made pistachios and almonds harder to grow - rarer. And as a result, the price has naturally shot up."

The podcast goes on to suggest that the pistacho market contributes to the overuse of water. Why isn’t the market for water functioning efficiently? What is the market failure described in this podcast?

Answer 1

In the cocoa market, a drought and a new study demonstrating health benefits of cocoa will affect the price and quantity bought and sold.

Step-by-step explanation:

In the cocoa market, if countries producing cocoa experience a drought and a new study is released demonstrating the health benefits of cocoa, several factors will affect the price and quantity bought and sold. The drought will reduce the supply of cocoa, causing a shift in the supply curve to the left. This will lead to a higher equilibrium price and a lower quantity bought and sold. On the other hand, the new study demonstrating health benefits of cocoa will increase the demand for cocoa, causing a shift in the demand curve to the right. This will lead to a higher equilibrium price and a higher quantity bought and sold.

Overall, the price of cocoa will increase due to the reduced supply and increased demand, while the quantity bought and sold will depend on the magnitude of the changes in supply and demand.