Chocolate Commentary

This article discusses cocoa harvests and its effect on chocolate production. Lately, the cocoa market has been hit by natural disasters. The poor harvests on the Ivory Coast have caused a decrease in the supply of cocoa this year. Along, with the decrease of cocoa availability, the demand has increased by 3% because citizens in eastern countries have become more interested in western tastes and are now demanding chocolate. Cocoa beans are used to make cocoa, which in turn is used to make chocolate. Therefore, the increased demand in chocolate leads to an increased demand of cocoa beans and cocoa. If the cocoa supply does not increase, the laws of supply and demand would predict that the price of chocolate will have to increase to deal with the increase of demand.
Supply is the amount of a good which firms are willing and able to sell at a given price. The supply can be determined by a number of factors including the price of a good, the costs to producing it and the firm’s motives. Demand is the amount of a good which consumers are willing and able to buy at a given price. As shown in figure one, the demand curve, D1, and the supply curve, S1, make a straight line. The point at which they intersect is the price equilibrium point, EQ1. The price equilibrium point is the point at which neither the consumers nor the suppliers are pushing to change the price. This becomes the market price, P1. So, in a steady market P1 would be the price for chocolate.
This market price can change if there is a change in the market. Recently in the cocoa market, there has been a decrease in supply due to “poor harvests on the ivory coast,
which grows 40 percent of the world’s cocoa beans.” These cocoa beans are used to make cocoa, so a decrease supply in beans means a decrease supply in cocoa. As shown in figure 2, These poor harvests along the Ivory Coast have made the supply curve shift from S1 to S2, making the equilibrium point along move from EQ1 to EQ2. This figure shows that while the quantity is
decreasing, from Q1 to Q2, the price is increasing, from P1 to P2. With the decrease of quantity and increase in price, the laws of supply and demand would suggest that the chocolate companies, who buy the cocoa, will have to raise the price of their product if the price for cocoa does not drop.
This change in the cocoa market leads to a change in the chocolate market, but there has been another change in the chocolate market. Due to a change in taste preference, the demand curve has shifted to the right, as shown in Figure 2. Citizens in countries such as China and India prefer more western tastes now days. Since the populations in these countries and nations are so large that it has led to a 3% shift in demand. This shift in demand curve has led to a new equilibrium point, EQ1 to EQ2. This new equilibrium point has a higher price and quantity than the first equilibrium point.
In all, the price of chocolate is predicted to rise. The most important factors influencing this change are supply and demand. The supply has shifted to the left, leading to a higher price, and the demand has shifted to the right, also leading to a higher price. If the demand curve or the supply curve shift, there is a change in market price. This market price has a different price and quantity. In this case of cocoa, the new market price has a much higher price than before. Since cocoa is used to make chocolate, if the price of cocoa does not decrease soon, chocolate companies will have “no choice but to increase the price of chocolate.” If the price of chocolate increases, it is predicted that there will be a decrease in the demand for chocolate, because not as many people will be willing and able to pay the higher price of the chocolate.

Test Reflection After Receiving Grade

After receiving my grade, I saw I got a 5 on IB standards.  This is still well above passing, but I feel like I could have done much better.  I will review the information on this test to make sure I fully understand the ideas of Price Elasticity of Demand.