Answer to Question #65809 in Macroeconomics for Monica

Question

Consider the supply of coffee. For each of the following events, will the current supply of coffee increase, decrease, or will supply remain unchanged? Identify the determinant of supply.
a) Coffee producers expect the price of coffee to greatly increase six months from now.
b) The price of labor in Brazil, a major coffee producing nation, has significantly increased.
c) The number of coffee producing nations has increased.
d) The price of coffee has decreased.

Answer 1

a) Coffee producers expect the price of coffee to greatly increase six months from now - the supply will decrease, because the sellers will wait the increase in price.
b) The price of labor in Brazil, a major coffee producing nation, has significantly increased - the supply will increase.
c) The number of coffee producing nations has increased - the supply will increase.
d) The price of coffee has decreased - the supply will decrease.