Question

First Economic Assignment Economy of Starbucks Coffee and Folgers Coffee Plot the graphs using 10 for both Q and P. Start at 5 Q and 5 P as point A (equilibrium). -Determine which goods are compliments and substitutes then determine which good is a normal and inferior good. Supply and Demand 1) Starbucks raises prices by $1.00 for consumers, thus decreases quantity demanded. 2) Hurricane destroys coffee bean farms, thus decreasing production by 2 cups of coffee hits California, thereby increasing/decreasing consumption by 1 good. onterey Park implements a subsidy, thus increasing production by 2 goods. 5) Which market(s) is/are experiencing a market failure?

Plot the graph using 10 for both Q and P. Start at 5 Q and 5 P as point A (equilibrium).

Answer 1

Goods which compete with each other are substituents of each other. For eg. Tea and Coffee.

Goods which go hand in hand with each other are complementary to each other. For eg. Printer and cartridge.

Starbucks Coffee and Folgers Coffee are substituents of each other, as they compete with each other.

They are normal goods as if the income of the population increases, the consumption of coffee increases.

For inferior goods if the income of the population increases, the consumption of the goods reduces.

1) As the price of Starbucks increases, the demand of coffee comes down.

2) As the Hurricane destroys coffee bean farms, the supply of coffee reduces.

3) Recession hits California, therefore decreases consumption by 1 good.

4) Monterey Park Implements a subsidy, thus increasing the supply by 2 goods.

5) Coffee Market of Starbucks is experiencing a market failure as they increase the price, thus the demand decreases and the overall supply of coffee also decreases.