Question

A region is in the middle of a very cold and snowy winter. As a result, hot chocolate has become more desirable, and many of the shipping channels for imported goods have closed due to the weather. What will happen to the price and quantity sold of hot chocolate made with imported cocoa? Price and quantity will both increase Price will increase and the effect on quantity cannot be determined Price will increase and quantity will decrease Neither the effect on quantity nor the effect on price can be determined

Answer 1

Answer:

The correct answer is letter "B": Price will increase and the effect on quantity cannot be determined.

Explanation:

By supply and demand law, as long as the price of a good or service increases the supply decrease and the demand increases. In the scenario, the close of shipping channels due to the adverse weather will reduce the supply of imported cocoa used for making hot chocolate which will cause the price of cocoa raise. As a result, the demand for cocoa will increase but quantity is uncertain because the relative impact of those fluctuations is imprecise.