Running Head: BUSINESS ECONOMICS
Q.1: Use the following graph to answer parts A-C.
A- What is true about the market of this good at the price of $4?
Ans: Equilibrium of Supply and Demand:
The equilibrium is established at the point where supply and demand curves intersect. The
quantity supplied equals the quantity demanded at the equilibrium price. Here, the equilibrium
price is $4 and at this price, 60 cups of coffee with cream are supplied and 60 cups coffee with
cream are demanded.
a.
B- Suppose this demand and supply graph represents the market for cream. Draw a new
graph below to show the effects on the cream market if there was damage to the Brazilian
coffee crop.
Ans:
1
2
B- Draw a new graph to show and analyze the impact of your events in the markets for
"coffee houses," such as Starbucks.
Ans:
Q.2: Fill in the accompanying table, showing whether equilibrium price and equilibrium
quantity go up, down or stay the same, or is indeterminate.
No Change in
Demand
An Increase in
Demand
A Decrease in
Demand
No Change in
Supply
P same
An Increase in
Supply
P down
A Decrease in
Supply
P up
Q same
P up
Q up
P ambiguous
Q down
P up
Q up
P down
Q up
P down
Q ambiguous
P ambiguous
Q down
Q ambiguous
Q down
X---THE END---X