Question

When Keurig entered the market, they were the only supplier of K-cups. Graph the supply / demand curve and label the equilibrium (E1). As the coffee makers increased in popularity, more manufacturers entered the K-cup market. Graph this and label (E2). Environmentalists then brought attention to the amount of waste created by K- cups. Graph this impact and label (E3). Discuss the resulting price and quantity.

Answer 1

When the Keurig is only the supplier, then the equilibrium would be at E1. When more sellers enter the market, the supply would increase and hence it would shift to right. So new supply would be S' and the new equilibrium would be E2.

C2 8t

Now when the wastes generated is being brought to attention by the environmentalists, it means that the demand would reduce. Now the change in quantity demanded would depend on the change in demand. If the change in demand is higher then quantity would be less than E1, otherwise it would be mroe than E1.

The price would definately reduce from initial level of P to P3, but the quantity would be ambiguous, depending on change in demand.