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30 Jan 2020
The market for coffee is initially in equilibrium with supply and demand curves of the usual shape. Pepsi is a substitute for coffee; cream is a complement for coffee. The following questions concern the market for coffee.
Assume that all ceteris paribus assumptions continue to hold except for the event(s) listed. Answer each question without considering the others.
1. Coffee is a normal good. A decrease in income will:
(i) increase the price of coffee and increase the quantity demanded of coffee.
(ii) increase the price of coffee and increase the quantity supplied of coffee.
(iii) decrease the price of coffee and decrease the quantity demanded of coffee.
(iv) decrease the price of coffee and decrease the quantity supplied of coffee.
(v) cause none of the above.
2. An increase in the price of Pepsi will:
(i) increase the price of coffee and increase the quantity demanded of coffee.
(ii) increase the price of coffee and increase the quantity supplied of coffee.
(iii) decrease the price of coffee and decrease the quantity demanded of coffee.
(iv) decrease the price of coffee and decrease the quantity supplied of coffee.
(v) cause none of the above.
3. A technological improvement lowers the cost of producing coffee. At the same time, preferences for coffee decrease. The equilibrium quantity of coffee will:
(i) rise.
(ii) fall.
(iii) remain the same.
(iv) rise or fall depending on whether the price of coffee falls or rises.
(v) rise or fall depending on the relative shifts of demand and supply curves.
The market for coffee is initially in equilibrium with supply and demand curves of the usual shape. Pepsi is a substitute for coffee; cream is a complement for coffee. The following questions concern the market for coffee.
Assume that all ceteris paribus assumptions continue to hold except for the event(s) listed. Answer each question without considering the others.
1. Coffee is a normal good. A decrease in income will:
(i) increase the price of coffee and increase the quantity demanded of coffee.
(ii) increase the price of coffee and increase the quantity supplied of coffee.
(iii) decrease the price of coffee and decrease the quantity demanded of coffee.
(iv) decrease the price of coffee and decrease the quantity supplied of coffee.
(v) cause none of the above.
2. An increase in the price of Pepsi will:
(i) increase the price of coffee and increase the quantity demanded of coffee.
(ii) increase the price of coffee and increase the quantity supplied of coffee.
(iii) decrease the price of coffee and decrease the quantity demanded of coffee.
(iv) decrease the price of coffee and decrease the quantity supplied of coffee.
(v) cause none of the above.
3. A technological improvement lowers the cost of producing coffee. At the same time, preferences for coffee decrease. The equilibrium quantity of coffee will:
(i) rise.
(ii) fall.
(iii) remain the same.
(iv) rise or fall depending on whether the price of coffee falls or rises.
(v) rise or fall depending on the relative shifts of demand and supply curves.
papayaprofessorLv10
5 Sep 2022
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Keith LeannonLv2
30 Jan 2020
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