Answered: Suppose that the U.S. government…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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key skill in economics is the ability to use the theory of supply and demand to analyze specific markets. In this week's assignment, you get a chance to demonstrate your ability to analyze the effects of several "shocks" to the market for coffee. Answer the following questions. Please rewrite the questions and write in complete sentences and paragraphs. Remember that economics is a science and that we are concerned with describing what, how, and why behaviors occur, therefore it should be detailed enough to clearly convey the economic concepts, using the appropriate terminology. You should apply the material from this module and chapter and not the internet. 1. Suppose that the U.S. government reduces the tariff on imported coffee, and a reputable study is published indicating that coffee drinkers have lower rates of colon cancer. How would we expect that this will affect the supply curve and why? (The supply curve can remain static, the supply curve can shift to the left, we do not have enough information to say, or the supply curve will shift to the right) 2. What would we expect to happen to the demand curve and why? (The demand curve can shift to the left, remain static, we don't have enough information to say, or it will shift to the right) 3. What collective effect will these changes) have on the direction of the equilibrium price and quantity? (In some cases, it may not be possible for the information given to determine the direction of a particular price change or a particular quantity change. We will symbolize these cases as, "P?" and "Q?" The four possible combinations of price and quantity changes are: PI Q?, P? Qi, P1Q?, P? Qi Remember to write your answers out without using these symbols.)

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