World production of wheat

    1. World production of wheat sometimes falls significantly due to extreme weather conditions, such as droughts. Draw a demand and supply graph to show the effect of a drought on the price of bread in Australia. 2. Chocolate lovers have been horrified by reports of a pending chocolate shortage. A recent report has predicted a worldwide chocolate shortage within the next five years which could cause the price of chocolate to double. The reasons for this prediction include an increase in diseases and pests affecting cocoa trees in some countries, such as Indonesia, and wars and instability in parts of West Africa, together with more secure production and profits for crops other than cocoa such as coffee and maize. On the demand side, growing incomes in countries such as China and India is leading to an increase in demand for chocolate. (Turnbull, 2015)ii Based on the above discussion, illustrate the following using demand and supply graphs for each of the below. a The effect on the supply of cocoa if the diseases and pests affecting the cocoa tree become worse. b The effect on the demand curve of cocoa if worldwide chocolate consumption continues to rise, particularly in countries such as China and India. c The effect on the world equilibrium price and quantity of cocoa if cocoa farmers in Indonesia substitute cocoa production with higher-value crops such as coffee and maize. d The effect on the equilibrium price of chocolate if all first-year students rush out and purchase chocolate for their economics lecturers. 3. Government regulations in Australia on the educational qualifications of those working in childcare centres require higher levels of formal training than a few years ago. Suppose that these regulations increase the quality of childcare and cause the demand for childcare services to increase. At the same time, assume that complying with the government regulations increases the costs of childcare businesses. Draw a demand and supply graph to illustrate the effects of these changes in the market for childcare services. Briefly explain whether the total quantity of childcare services purchased will increase or decrease as a result of the regulations.