Question: This question focuses on the market for coffee .

In an effort to make your solutions clear, please make sure you do the following for all parts of this question where a graph is required:

• Label all axes and curves
• Indicate the direction of any shifts of or movements along supply and demand curves with arrows
• Label original and new equilibrium price and quantity

1. In August of 2014, the article titled, "Why Coffee Is Getting More Expensive" stated, "one driver of coffee prices right now is prosaic: Colombia has had weak coffee harvests because of too much rain….." Represent this statement from the article on a supply/demand graph in the market for coffee. Use words to support your graph if you want to be considered for partial credit.
2. Answer this question independently of part a. In February of 2014, the article titled, "Popularity of coffee, energy drinks rising among teens: CDC," stated, "although young people are drinking less soda, the consumption of energy drinks, tea and coffee is rising."  Represent this statement from the article on a supply/demand graph in the market for coffee. Use words to support your graph if you want to be considered for partial credit.
3. Circle the best solution below. If both of the shocks described in parts a. and b. occur simultaneously, what is the impact on equilibrium quantity?
   INCREASE DECREASE AMBIGUOUS
4. Provide a required justification of your solution in part c.
5. Show that if all shocks to the market are of the same magnitude, the increase in the equilibrium price of coffee from the two shocks is larger if demand is inelastic. To show this, draw one graph where demand is elastic and another where demand is inelastic. Compare the graphs to show the difference in the change in equilibrium price.

Note: You are required to draw two graphs, but words may also be used for partial credit.

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Solution: The downloadable solution consists of 5 pages
Deliverable: Word Document