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13. The equilibrium price of coffee in an economy, measured in dollars, is about $2,000 per ton. To help the coffee farmers earn a higher income, the government set the price to $2,500 per ton. a. How will this affect the demand and supply of coffee in the coffee market?

13. The equilibrium price of coffee in an economy, measured in dollars, is about $2,000 per ton. To help the coffee farmers earn a higher income, the government set the price to $2,500 per ton. a. How will this affect the demand and supply of coffee in the coffee market?

Principles of Economics 2e
Principles of Economics 2e
2nd Edition
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter3: Demand And Supply
Section: Chapter Questions
Problem 53P: Table 3.8 shows information on the demand and supply for bicycles, where the quantities of bicycles...
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offer was made for as much raw sugar as the sugarcane mills produced. Any raw sugar purchased by the govern- ment was not sold in the domestic market, as this might have caused raw sugar prices to fall. a. Under this policy, what do you think the government's demand curve for sugar looks like? b. What impact does this policy likely have on domestic sugar prices? Explain your reasoning with a supply- and-demand diagram. 13. The equilibrium price of coffee in an economy, measured in dollars, is about $2,000 per ton. To help the coffee farmers earn a higher income, the government set the price to $2,500 per ton. a. How will this affect the demand and supply of coffee in the coffee market? b. Construct a diagram for coffee to show the effect of the government action. Will the coffee farmers be bet- ter off? 14. Note: This problem requires some basic algebra. The de- mand for ice cream is Qp = 70-4P, and the supply of ice cream is Qs = 10 + 2P, where P is the price of ice cream. a. Find the equilibrium price and quantity of ice cream. b. Suppose consumers' income increases and ice cream is considered as a normal good. As a result, the demand curve for ice cream becomes 2 = 100 - 4P. Find the new equilibrium price and quantity of ice cream.
Transcribed Image Text:offer was made for as much raw sugar as the sugarcane mills produced. Any raw sugar purchased by the govern- ment was not sold in the domestic market, as this might have caused raw sugar prices to fall. a. Under this policy, what do you think the government's demand curve for sugar looks like? b. What impact does this policy likely have on domestic sugar prices? Explain your reasoning with a supply- and-demand diagram. 13. The equilibrium price of coffee in an economy, measured in dollars, is about $2,000 per ton. To help the coffee farmers earn a higher income, the government set the price to $2,500 per ton. a. How will this affect the demand and supply of coffee in the coffee market? b. Construct a diagram for coffee to show the effect of the government action. Will the coffee farmers be bet- ter off? 14. Note: This problem requires some basic algebra. The de- mand for ice cream is Qp = 70-4P, and the supply of ice cream is Qs = 10 + 2P, where P is the price of ice cream. a. Find the equilibrium price and quantity of ice cream. b. Suppose consumers' income increases and ice cream is considered as a normal good. As a result, the demand curve for ice cream becomes 2 = 100 - 4P. Find the new equilibrium price and quantity of ice cream.
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