Coffee dmind and supply




Assignment : Supply and Demand of Coffee A key skill in economics is the ability to use the theory of supply and demand to analyze specific markets . In this week’s assignment , you get a chance to demonstrate your ability to analyze the effects of several ” shocks ” to the market for coffee . Answer all parts of each of the scenarios below . Scenario 1 : Suppose that , as part of an international trade agreement , the U.S. government reduces the tariff on imported coffee . Will this affect the supply or the demand for coffee ? Why ? Which determinant of demand supply is being affected ? Show graphically with before – and after – curves on the same axes . How will this change the equilibrium price and quantity of coffee ? Explain your reasoning . Scenario 2 : Suppose the National Institutes of Health publishes a study finding that coffee drinking reduces the probability of getting colon cancer . How do you imagine this will affect the market for coffee ? Why ? Which determinant of demand or supply is being affected ? Show graphically with before and after – curves on the same axes . How will this change the equilibrium price and quantity of coffee ? Explain your reasoning . Scenario 3 : Combine parts 1 and 2. Suppose that the U.S. government reduces the tariff on imported coffee , and a reputable study is published indicating that coffee drinkers have lower rates of colon cancer . What will the combined impact be on the equilibrium price and quantity of coffee ? Explain your reasoning and show graphically . Make sure you think this through carefully !

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