Homework Answers
Answer : A) The demand for coffee does not change.
Due to drought the coffee crop decreases by half amount. It only decrease the supply of coffee not the demand for coffee.
B) The supply of coffee decrease.
Due to drought the coffee crop decreases by half amount. As a result, the supply curve of coffee shift to leftward.
C) Due to shifting the supply of coffee to leftward a new equilibrium occurs in the coffee market. At this new equilibrium the price level increase.
D) Due to decrease in supply at new equilibrium the quantity level decrease.
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