National Occupational Competency Testing Institute (NOCTI) Business Practice Exam

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According to the law of supply and demand, what happens when high winds damage coffee plants in Hawaii?

Coffee will be in short supply, therefore higher in price.
Coffee prices will remain the same.
Coffee will be more abundant and cheaper.
Prices of coffee will decrease significantly.

The correct answer is: Coffee will be in short supply, therefore higher in price.

When high winds damage coffee plants in Hawaii, the availability of coffee decreases due to the destruction of crops. According to the law of supply and demand, when the supply of a product drops significantly while demand remains steady or increases, it leads to a shortage of that product. In this case, the reduced supply of coffee results in heightened competition among buyers for the limited available product, causing prices to rise. Thus, it is accurate to say that coffee will be in short supply, leading to an increase in its price. This dynamic is a fundamental principle in economics, illustrating how external factors, such as natural disasters, can impact market supply and subsequently affect pricing.