-Demand and Supply Balance Table 1: Coffee Prices in Saudi Riyal per pound a.) D
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Question
-Demand and Supply Balance
Table 1: Coffee Prices in Saudi Riyal per pound
a.) Draw the supply and demand curve.
b.) What is the equilibrium price and equilibrium quantity?
c.) What is going to happen to the equilibrium price and equilibrium quantity if a draught is going to destroy the coffee harvest in Brazil, one of the largest coffee bean producers in the world? Just mention the direction of change not any actual numbers.
d.) What is going to happen to the equilibrium price and equilibrium quantity if, in addition to the draught in Brazil, a global recession reduces the demand for coffee beans.
Price in SAR Quantity Demanded (in bags) Quantity Supplied (in bags) 5 200,000 80,000 6 180,000 120,000 7 160,000 160.000 8 140,000 200,000Explanation / Answer
a.
b.
As per the equilibrium in the given diagram,
Equilibrium Price = 7
Equilibrium Quantity = 160,000 (in bags)
c.
If drought takes place then supply will be reduced and demand will become higher than the supply. It will shift supply curve to the left side. Or, the direction of change in supply curve will be to the left.
d.
Drought reduces the supply and shifts the supply curve to the left. Recession reduces the demand and demand curve will also shift to the left. It will create the new equilibrium of demand and supply. It will create multiple scenarios that will decide the new equilibrium price and quantity.
Though, degree of change depend upon the severity of impact of drought and recession.
Price in SAR Quantity Demanded (in bags) Quantity Supplied (in bags) 5 200,000 80,000 6 180,000 120,000 7 160,000 160,000 8 140,000 200,000Related Questions
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