Question

i dont understand which one answer and read it careful plus

Assume the associated figure represents the market for coffee shop coffee in your town with initial equilibrium at point a, and that coffee is a normal good. Which of the following figures represents the impact of a decrease in income andadvances in the technology used to brew coffee?Assume the magnitude of each change is the same. 10 9 Supply Price ( per cup of coffee) Demand 7 8 10 3 5 6 Quantity (Cups of coffee, thousands)

Answer 1

The shift in the demand curve occurs when there is a change in the factors other than its own price and quantity demanded, like changes in tastes, changes in income, change in the price of related good, etc.

The shift in the supply curve occurs when there is change in the factors other than its own price and quantity supplied, that is, changes in input prices, changes in technology, changes in number of sellers in the market, etc.

Original demand is given by blue line and original supply is given by green line.

So,

When there is a decrease in the income of consumers, the demand for coffee will decrease as it is a normal good. Due to this, demand curve will shift to the left.

When there is advancement in the technology used to brew coffee, the supply of coffee will increase in the market as production will take place at a higher rate. Thus, supply curve will shift to the right.

The shift in the demand curve to the left and shift in the supply curve to the right is shown in option 3 whereby old demand is given by blue line and new demand is given by yellow line and old supply is given by green line and new supply is given by orange line.

The old equilibrium is shown by point 'a' and new equilibrium is shown by point 'b'. As it can be observed that the equilibrium quantity of cups of coffee remains constant but the equilibrium price of a cup of coffee decreases in the market.