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Microeconomics Case Study: Supply and Demand Coffee Prices Set to Soar

## Question 1: Supply and Demand Diagram

Microeconomics Case Study: Supply and Demand "Coffee Prices set to Soar"

1. a) Draw and completely label a Supply and Demand diagram. Clearly indicate the equilibrium price (Pe) and the equilibrium quantity (Qe) on your graph. You do not need to use actual numbers for your price and quantity, just use Pe and Qe. Lastly, label your graph the "World Market for Coffee" on the x-axis. [3 marks]

b) Explain briefly what the term "equilibrium" actually is, referencing your graph. [1 marks]

2. a) Draw a new separate diagram here, the same as in Question 1, completely labeled. Then shift one of the curves to indicate the effect on this market of a "wealthier world", where people have a growing "taste" to start their day off with a cup of coffee. Clearly show any changes in supply or demand, the direction of any change, and clearly indicate any new equilibrium price and quantity. . [3 marks]

b) Explain the steps of your graphical analysis in (a), using words and sentences. Include specific comments on any changes in supply or demand (and the "shifters"), surplus or shortage, and any resulting change in equilibrium price and quantity. [3 marks]

3. a) Draw another new separate diagram here, the same as in Question 1, completely labeled. Then shift one of the curves to indicate the effect on this market of bad weather and torrential rainstorms causing extensive damage to the coffee bean crop. Clearly show any changes in supply or demand, the direction of any change, and clearly indicate any new equilibrium price or quantity. [3 marks]

b) Explain the steps of your graphical analysis in (a), using words and sentences. Include specific comments on any changes in supply or demand (and the "shifters"), surplus or shortage, and any resulting change in equilibrium price and quantity. [3 marks]

4. a) Draw another new separate diagram here, the same as in Question 1, completely labeled. Then add the simultaneous effects of both the changes indicated in question (2) and (3). Clearly show changes in supply AND demand in this diagram, the direction of these changes, and clearly indicate any new equilibrium price or quantity. [3 marks]

b) Make a relevant conclusion (a good one!) describing the "shifts" again, and what specifically caused D and S to shift (again), and then compare the resulting final change in equilibrium price and quantity after both shifts, to the initial equilibrium price and quantity. [3 marks]