Question

8:40 ALO a ... * . 80% + Expert Q&A 0 + Question: A key skill in economics is the ability to use the theory of supply and demand to analyze specific markets. Below are three scenarios in which you will get a chance to demonstrate your ability to analyze the effects of several shocks to the market for coffee. Answer all parts to each of the scenarios. 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 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 reason. Scenario 2. Suppose the National Institute 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 supple 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

Please assist with each scenario. Thank you

Answer 1

Scenario 1: Reduction in will increa firms supplyer The supply a ! where and Quantity ction in tarift on coffee increase the number of Thice U.S. supplying coffee in the market and this will shift att si supply curve right wards to 1 - - when with new equilibrium at Ez, price of coffee has decreased us ed equilibrium Duantity has increased. Canario 2 This will increase consumer's tastes and preferences towards coffee and thift the demand curve right wards & to d'ol with new equilibrium at Er where equilibrium price and Quantity has increased. Scenario 3: Combining above scenaries will a lead 8 to new eque librium at pant & in adjacent diagram where equilibrium, Quantity has trice et increased and impact on price is as it ambiguous on depends the of quantun shift of and supply demand curves