Question

Coffee prices are coming down again, after hitting a record high of $4.42 last year.  An agricultural Department economist, who had predicted $5.00 a pound coffee this year, says he "underestimated the power of the U.S. consumer movement."  Perhaps as with so many economists these days, he simply forgot his freshman economics, which has nothing to do with "movements."  The coffee market is behaving the way the basic textbooks say a market behaves.  Prices go up, demand falls, and prices come down.

            1.         Consider the last sentence of this editorial:

                        

                        a.         Do you agree with this description of a market response to a decrease in the supply of coffee?  Explain your reasoning carefully, making use of a supply and demand diagram.

                        b.         If you disagree, how would you alter the sentence to make it a valid statement of how markets behave when supply decreases?

Answer 1

Answer b: The altered sentence would be: supply goes up, price falls, and quantity supplied increases.
Similarly, supply comes down, the price goes up, and the quantity supplied increases.
Explanation: when there decrease in supply, this means that the supply curve has shifted to the left due to changes in the factors affecting supply. In contrast, movement along the supply curve happens when there is a change in the prices of goods and services, keeping all other factors constant.
As per the question, we have given a situation in it has been asked, what will happen when supply decreases, so the answer to this is when supply decreases, prices will go up according to t the demand and supply diagram we have drawn above,
if the case of different and it was asked what will happen to the supply curve when prices are decreases, then we must have said that when prices decrease, there is a downward movement along the supply curve, and as a result, supply decreases.