You are studying the international market for coffee. The world production of coffee beans increases, and at the same time, consumers worldwide start favoring tea over coffee. What is the effect on the equilibrium price and the equilibrium quantity in the coffee market?

Question

Quizplus · Accepted Answer

The increase in world production of coffee beans will shift the supply curve to the right, leading to a decrease in price and an increase in quantity. However, the change in consumer preferences towards tea will shift the demand curve for coffee to the left, causing a decrease in both the equilibrium price and quantity. The net effect is a decrease in the equilibrium price, but the change in equilibrium quantity is ambiguous as the two opposing factors are affecting it in different ways.

You Are Studying the International Market for Coffee