Question

Draw and give examples where possible to support your answers.

QUESTION1. Suppose the market for coffee is currently in equilibrium at a price of RM 3.00. An early frost coffee-growing nations decreases the supply of coffee. Use supply and demand analysis to forecast the impact of the freeze on the market equilibrium price and quantity of coffee .

Please the diagram is very important I need it ! Please draw it !

Answer 1

The above image shows the equilibrium in coffee market.

Initially, the coffee market was in equilibrium at the point of intersection and DD. At this equilibrium, the market price of coffee was 3 and the quantity supplied and quantity demanded were units each.

After the frost in coffee growing nations, the supply of coffee decreased. This led to an upward shift in the supply curve from to . The new equilibrium is at the point of intersection of and DD. The new equilibrium price is higher than the old equilibrium price. The new quantity supplied and demanded is lesser than the old quantity supplied at demanded .

Hence, from the demand and supply analysis of the coffee market conducted above, it can be concluded that the equilibrium price of coffee will increase and quantity demanded and supplied would decrease.