According to a news article on bloomberg.com, the demand for coffee is increasing as “millennials’ seemingly unquenchable thirst for coffee is helping to push global demand to a record.” At the same time, coffee crops in Brazil and Asia have been hampered by dry weather and droughts. The article noted that “consumption is rising as supplies are getting tighter.”
a. Use a demand and supply graph of the coffee market to illustrate how the equilibrium quantity of coffee can increase as a result of these events. Be sure that all curves on your graphs are properly labeled, that you show any shifts in those curves, and that you indicate the initial and final equilibrium points.
b. The article contains a chart showing changes in worldwide sales of coffee from 2006 through 2016. The chart is labeled “World demand has expanded in the past decade.” Are data on the quantity of coffee sold and data on the demand for coffee the same thing? Can the quantity of coffee sold increase if the demand for coffee hasn’t increased? Briefly explain.