ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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A key skill in economics is the ability to use the theory of
Scenario 1: Suppose that the FDA increases regulations for 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 Mayo publishes a study finding that the caffeine in coffee increases the probability of getting Alzheimer’s. 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 FDA increase regulation of coffee, and a reputable study is published indicating that coffee drinkers have higher rates of Alzheimer’s. 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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