would the following lead to an increase in supply or an increase in quantity supplied in the market for coffee
by admin on Thursday, September 2nd, 2010 | 2 Comments
a decrease in the price of coffee beans?
a law raising the price of a cup of coffee to .00 per cup?
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Neither an increase in supply or an increase in the quantity supplied would result in the scenarios you described.
Decreasing the price of coffee beans would (if everything else stayed equal) decrease the price of coffee, which would increase demand. Assuming that there were no monopolistic effects or collusion, coffee producers would produce more coffee to meet this demand.
Raising the price of a cup of coffee would decrease demand. In response, producers might decide to produce less, which would also decrease supply.