Consider the market for pumpkin spice lattes in the United States and each of the following scenarios. Assume the pumpkin spice latte market is initially in equilibrium. a) What would happen to the equilibrium price and quantity of pumpkin spice lattés if coffee shops began using a machine that reduced the amount of labor necessary to produce steamed milk, which is used to make lattés? Use the 3 step method to explain your answer graphically and in writing. b) Assume the market for pumpkin spice lattes begins in its initial equilibrium state (scenario from part (a) has not occurred). Scientists publish a report showing conclusive evidence that the combination of espresso and pumpkin spice flavoring prevents heart attacks. What happens to the equilibrium price and quantity in the market for pumpkin spice lattes? Use the 3 step method to explain your answer graphically and in writing. c) Both events described in a) and b) occur simultaneously. What happens to equilibrium price and quantity? What happens if the change in the supply curve is greater than the change in the demand curve? If the change in the demand curve is greater than the change in the supply curve? Explain your answers graphically and in writing.

Consider the market for pumpkin spice lattes in the United States and each of the following scenarios. Assume the pumpkin spice latte market is initially in equilibrium. a) What would happen to the equilibrium price and quantity of pumpkin spice lattés if coffee shops began using a machine that reduced the amount of labor necessary to produce steamed milk, which is used to make lattés? Use the 3 step method to explain your answer graphically and in writing. b) Assume the market for pumpkin spice lattes begins in its initial equilibrium state (scenario from part (a) has not occurred). Scientists publish a report showing conclusive evidence that the combination of espresso and pumpkin spice flavoring prevents heart attacks. What happens to the equilibrium price and quantity in the market for pumpkin spice lattes? Use the 3 step method to explain your answer graphically and in writing. c) Both events described in a) and b) occur simultaneously. What happens to equilibrium price and quantity? What happens if the change in the supply curve is greater than the change in the demand curve? If the change in the demand curve is greater than the change in the supply curve? Explain your answers graphically and in writing.

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter4: Supply And Demand: An Initial Look

Section: Chapter Questions

Problem 2TY

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