Sometimes the exports of developing nations are concentrated in only one or a few primary products. For example, according to World Bank data, coffee constitutes almost 90% of Burundi's total exports. Therefore, changes in demand or supply of coffee can have significant effects on the health of Burundi's economy. The current world price of coffee is $5.00 per pound, but there is uncertainty about the shape of the demand and supply curves. The following graphs (scenario A and scenario B) show two possibilities for demand and supply in the market for coffee. Suppose that favorable growing conditions cause an increase in the global supply of coffee. On the following graph, shift the demand or supply curve of scenario A to show what happens in the market for coffee as a result of this event. Note: Select and drag one or both of the curves to the desired position. Curves will snap into position, so if you try to move a curve and it snaps back to its original position, just drag it a little farther. (Jeon) 2 PRICE (Dollars) 9 3 2 0 0 1 2 On the following graph, shift the demand or supply curve of scenario B in the same direction that you did in scenario A. Scenario A 2 True I O False Supply Den and 6 T QUANTITY (Pounds of coffee) Scenario B Supply 8 3 QUANTITY (Pounds of coffee) 9 8 10 Demand Original Price New Price Scenario (Dollars per pound) (Dollars per pound) A B 5.00 5.00 10 Demand Supply Demand In the following table, enter the new price for coffee under each scenario as a result of the favorable growing conditions. (Hint: Select the black point (plus symbol) representing the new equilibrium on the previous graphs to see its coordinates.) Supply (?) True or False: Because the demand for coffee is more elastic in scenario A versus scenario B, changes in supply cause more volatile price fluctuations for Burundi under scenario A.
Sometimes the exports of developing nations are concentrated in only one or a few primary products. For example, according to World Bank data, coffee constitutes almost 90% of Burundi's total exports. Therefore, changes in demand or supply of coffee can have significant effects on the health of Burundi's economy. The current world price of coffee is $5.00 per pound, but there is uncertainty about the shape of the demand and supply curves. The following graphs (scenario A and scenario B) show two possibilities for demand and supply in the market for coffee. Suppose that favorable growing conditions cause an increase in the global supply of coffee. On the following graph, shift the demand or supply curve of scenario A to show what happens in the market for coffee as a result of this event. Note: Select and drag one or both of the curves to the desired position. Curves will snap into position, so if you try to move a curve and it snaps back to its original position, just drag it a little farther. (Jeon) 2 PRICE (Dollars) 9 3 2 0 0 1 2 On the following graph, shift the demand or supply curve of scenario B in the same direction that you did in scenario A. Scenario A 2 True I O False Supply Den and 6 T QUANTITY (Pounds of coffee) Scenario B Supply 8 3 QUANTITY (Pounds of coffee) 9 8 10 Demand Original Price New Price Scenario (Dollars per pound) (Dollars per pound) A B 5.00 5.00 10 Demand Supply Demand In the following table, enter the new price for coffee under each scenario as a result of the favorable growing conditions. (Hint: Select the black point (plus symbol) representing the new equilibrium on the previous graphs to see its coordinates.) Supply (?) True or False: Because the demand for coffee is more elastic in scenario A versus scenario B, changes in supply cause more volatile price fluctuations for Burundi under scenario A.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:4. Unstable export markets
Sometimes the exports of developing nations are concentrated in only one or a few primary products. For example, according to World Bank data,
coffee constitutes almost 90% of Burundi's total exports. Therefore, changes in demand or supply of coffee can have significant effects on the health
of Burundi's economy.
The current world price of coffee is $5.00 per pound, but there is uncertainty about the shape of the demand and supply curves. The following graphs
(scenario A and scenario B) show two possibilities for demand and supply in the market for coffee.
Suppose that favorable growing conditions cause an increase in the global supply of coffee.
On the following graph, shift the demand or supply curve of scenario A to show what happens in the market for coffee as a result of this event.
Note: Select and drag one or both of the curves to the desired position. Curves will snap into position, so if you try to move a curve and it snaps back
to its original position, just drag it a little farther.
10
9
8
2
1
0
10
9
2
1
0
0
1
0
1 2
Scenario A
2 3 4 5
O True
Supply
7
QUANTITY (Pounds of coffee)
On the following graph, shift the demand or supply curve of scenario B in the same direction that you did in scenario A.
False
Demand
Original Price
Scenario (Dollars per pound)
A
B
5.00
5.00
Scenario B
Supply
3 4 5 6
7
QUANTITY (Pounds of coffee)
8
9
8
10
Demand
10
Demand
-0
New Price
(Dollars per pound)
Supply
In the following table, enter the new price for coffee under each scenario as a result of the favorable growing conditions. (Hint: Select the black point
(plus symbol) representing the new equilibrium on the previous graphs to see its coordinates.)
Demand
(?)
Supply
True or False: Because the demand for coffee is more elastic in scenario A versus scenario B, changes in supply cause more volatile price fluctuations
for Burundi under scenario A.
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