Combine parts 1 and 2. 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. What with the combined impact have on the equilibrium price and quantity of coffee? Explain your reasoning and show graphically.
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A key skill in economics is the ability to use the theory of supply and
Scenario 1: Suppose that, as part of an international trade agreement, the U.S. government reduces the tariff on imported coffee. Will this affect the supply or demand for coffee? Why? Which determinant of demand or supply is being affected? Show graphically with before and after
Scenario 2: Suppose the National Institute of Health publishes a study finding that coffee drinking reduces the probability of getting colon cancer. How do you imagine this will affect the market for coffee? Which determinant of demand or supply is being affected? Show graphically with before and after curves on the same axes. How will this change affect the equilibrium price and quantity of coffee? Explain your reasoning.
Scenario 3: Combine parts 1 and 2. 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. What with the combined impact have on the equilibrium price and quantity of coffee? Explain your reasoning and show graphically. Make sure you think this through carefully!
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