Consider the Demand for Computers. for Each of the Following, State the Effect on Demand

...

The bad weather may affect the production of coffee beans, so the supply curve may shift left, so the equilibrium price may increase and equilibrium quantity decrease.

b. What is the effect of the change in the market for coffee beans on the equilibrium price and quantity of coffee?

As the reducing production of coffee beans, the supply curve may shift to left hand side, so the equilibrium price increase and quantity decrease at that point.

c. What is the effect of the change in the market for coffee on the equilibrium price and quantity of a powdered non-dairy creamer?

A powdered non-dairy creamer is the a complementary good for coffee beans. When the equilibrium price of coffee beans increase, the quantity of coffee beans can drop. It also affect the usage of powdered no-dairy creamer, so the quantity of this creamer may drop as well.

d. What is the effect of the change in the market for coffee on the equilibrium price and quantity of tea?

The equilibrium price of coffee lead to the reducing quantity of consumption for coffee, so the consumers may choose other substitutes like tea. The equilibrium price of tea may increase and quantity of tea’s consumption also increase.

Application Questions

3. According to leading coffee merchants, there will be a shortage in the global coffee market due to Brazil’s declining coffee production in 2014-2015.62 Brazil is the world’s largest producer of coffee beans.

a. Using demand and supply analysis, illustrate the effect of Brazil’s declining coffee production on the global coffee market in 2014. Show the shortage of coffee beans in your graph.

S1[pic 35]

[pic 36]

S[pic 37][pic 38]

D

[pic 39]

When Brazil decided to decline coffee production, the quantity of coffee beans may decrease, the entail supply curve move to the left as S1. The equilibrium price may increase.

b. With the shortage, how would you expect the price of coffee beans to change in 2014?

Initially, when Brazil decided to decrease production of coffee bean, the price of coffee beans obviously increase. However, the higher price of coffee beans may encourage farmer to plant coffee beans. Then the price may drop to the lower level.

c. Arabica coffee beans were being traded at seven-year lows in November 2013. If the demand for coffee beans decreases further in 2014, along with the change mentioned above,

how would you expect the equilibrium price and quantity of Arabica coffee beans to change?

Draw a graph to explain your answer

[pic 40]

S[pic 41][pic 42]

[pic 43]

D

D1[pic 44]

When the demand expected to decrease in 2014, the demand curve may shift left. In the light of the graph above, equilibrium price may decrease.