Question

In the past few years, the demand for donuts has greatly increased. This increase in demand might best be explained by 1. an increase in the cost of making donuts. 2. an increase in the price of coffee. 3. consumers expecting donut prices to fall. 4. a change in buyer tastes.

Answer 1

Answer:

a change in buyer tastes.

Explanation:

Increase in demand for doughnut can be caused by:

1. Change in buyers tastes: if the taste of consumers change in favour of doughnut, the demand for doughnut increases.

2. Increase in the price of substitutes: if the price of a substituite e.g. bagel increases, the demand for doughnut increases because consumers would subsituite a bagel for doughnut. Coffee can't be considered as a subsituite for doughnut.

3. Increase in income : if income increases, demand for doughnut increases.

Increase in cost of production reduces supply and doesn't affect demand.

I hope my answer helps you