Supply and Demand, Markets, Prices and Price Setting
Cirilo "Lee" E. Montano
Allison Kaminaga, Ph.D.
December 10, 2012
Explain what happens to price and quantity of coffee when the following events occur:
1. An advertising campaign highlights scientific studies that find drinking coffee can help reduce weight gain. a. What do you think would happen?
People will buy more coffee, drink more coffee, and research what coffee will help them lose more weight. Case in point, does espresso assist in more weight loss then normal coffee? Espresso contains more caffeine, so the thought process might be, that you can lose more weight by drinking espresso than you would drinking your everyday run …show more content…
e.g. Price of donuts decrease.
Have you had a fresh right out of the deep-fryer doughnut from Krispy Kreme? If you have, it would be hard to believe that the price would drop. I would pay $5 for one donut from this place. However, for instructional purposes only, let’s talk about why they would decrease in price. Why isn’t anyone buying donuts? Coffee and donuts go together. It’s the same concept as Oreos cookies and milk, and it just goes together. I prefer Dunkin Donuts; you can sit at the counter order a donut and some very aromatic Dunkin Donuts coffee. You cannot and should not have one without the other. So, if you lower the price on donuts, will you buy of them when you purchase coffee? I would have to say yes. Krispy Kreme donuts don’t need coffee to go with they are fresh but when they cold it’s a match made in heaven. Assume that cookies are a complement to coffee. If donuts are cheaper, then the consumer will increase quantity demanded of donuts. If consumers buy more donuts, then there will be a need for more coffee to go with the donuts so the demand for coffee will increase. This event causes a shift of the demand curve to the right. The shift will cause price and quantity of coffee to increase.
2. What are the major