Final answer:
It is true that changes in consumer tastes, a key demand variable, can override standard demand and supply predictions, altering the direction of trade that would otherwise be expected according to economic theory.
Step-by-step explanation:
The statement that differences in taste, a demand variable, can reverse the direction of trade predicted by the theory is true. In the context of economic theory, particularly the model of demand and supply, the basic premise is that higher prices typically reduce the quantity demanded while lower prices increase it. However, changes in consumer preferences, or tastes, can indeed influence demand in such a way that the usual relationship between price and demand is altered. For instance, if consumers start to prefer digital news sources over traditional ones, the demand for print, radio, and television news will decrease irrespective of the price. Similarly, a restaurant that charges high prices but is perceived to provide superior quality, ambiance, or exclusive dining experience may attract more customers despite higher prices. Conversely, if the prices decline significantly but quality remains poor, demand might not increase as expected.