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Author Question: Suppose that the market for coffee is in equilibrium at a price of 9.50 per pound and a monthly ... (Read 64 times)

K@

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on: Jun 29, 2018
Suppose that the market for coffee is in equilibrium at a price of 9.50 per pound and a monthly quantity of 20 million pounds. News of a drought in Brazil arrives so that people know that the supply of coffee months from now will be sharply reduced.
 
  What, if anything, will happen in the coffee market now? Explain.

Question 2

Which of the following does NOT cause a shift in demand?
 
  A) change in income
  B) change in tastes
  C) change in the price of the good
  D) change in the price of a related good


Bsand8

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Reply #1 on: Jun 29, 2018
Answer to Question 1

The expectations of reduced supplies and higher prices in the future will cause current demand to increase and the market clearing price to rise.

Answer to Question 2

C


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