Answer to Question #233750 in Microeconomics for cock long

Question

Consider the market for coffee beans. Suppose that the prices of all other caffeinated beverages

go up 30 percent while at the same time a new fertilizer boosts production at coffee plantations

dramatically. Can you tell what will happen to the equilibrium price? What about the equilibrium

quantity?

Answer 1

Due to price increase, the demand will decrease as other customers may see the budget is beyond their income. However, the boost in production will further increase the supply. Increase in supply as well as demand decrease makes the equilibrium price to fall however the impact on the equilibrium quantity may not be determined.