What would happen to the equilibrium price and quantity of coffee if the wages of coffee-bean pickers fell and the price of tea fell

Question

Quizplus · Accepted Answer

If the wages of coffee-bean pickers fall, the cost of producing coffee will decrease, leading to an increase in the supply of coffee. This will cause the equilibrium price of coffee to fall.

If the price of tea falls, the demand for coffee may decrease, as consumers have a substitute good that is now cheaper. This will further decrease the equilibrium price of coffee.

However, it is unclear what effect these two changes will have on the quantity of coffee sold. The increase in supply due to lower wages may lead to an increase in quantity, but the decrease in demand due to cheaper tea may lead to a decrease in quantity. Therefore, the effect on quantity is ambiguous.

What Would Happen to the Equilibrium Price and Quantity of Coffee