Refer to the accompanying figure. Suppose the solid line shows the current demand curve for coffee. In response to an announcement that much of next year's coffee crop has been destroyed by a storm in Brazil, you should expect:
A)an increase in the quantity of coffee demanded, but no shift in the demand curve.
B)the demand curve to shift to D(A)in anticipation of higher future prices.
C)the demand curve to shift to D(
B)in anticipation of higher future prices.
D)neither a change in quantity demanded nor a shift in demand because next year's coffee crop will not affect the current demand for coffee.

Question

Refer to the accompanying figure. Suppose the solid line shows the current demand curve for coffee. In response to an announcement that much of next year's coffee crop has been destroyed by a storm in Brazil, you should expect: 
A)an increase in the quantity of coffee demanded, but no shift in the demand curve.
B)the demand curve to shift to D(A)in anticipation of higher future prices. 
C)the demand curve to shift to D(
B)in anticipation of higher future prices. 
D)neither a change in quantity demanded nor a shift in demand because next year's coffee crop will not affect the current demand for coffee.

Quizplus · Accepted Answer

If people expect the future price of a good to increase, then current demand for the good will increase.

Refer to the Accompanying Figure