Asked by Ashley Minaya on May 14, 2024
Verified
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?
A) Price would fall, and the effect on quantity would be ambiguous.
B) Price would rise, and the effect on quantity would be ambiguous.
C) Quantity would fall, and the effect on price would be ambiguous.
D) Quantity would rise, and the effect on price would be ambiguous.
Coffee-Bean Pickers
Individuals engaged in the agricultural activity of harvesting coffee beans from plants.
- Elucidate the components that engender modifications in demand and supply curves, resulting in an evolving equilibrium.
- Explore how market equilibrium is altered by events originating from external environments.
- Understand the consequences of substitute and complementary goods on the dynamics of the market.
Verified Answer
VN
Vinny NicastroMay 16, 2024
Final Answer :
A
Explanation :
A decrease in the wages of coffee-bean pickers would lower the production costs for coffee, leading to an increase in supply. This would typically result in a lower equilibrium price for coffee. However, if the price of tea (a substitute for coffee) also falls, some consumers might switch from coffee to tea, reducing the demand for coffee. This could further lower the price of coffee. The overall effect on quantity is ambiguous because the increase in supply (due to lower production costs) and the decrease in demand (due to lower tea prices) have opposite effects on the quantity of coffee sold.
Learning Objectives
- Elucidate the components that engender modifications in demand and supply curves, resulting in an evolving equilibrium.
- Explore how market equilibrium is altered by events originating from external environments.
- Understand the consequences of substitute and complementary goods on the dynamics of the market.
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