Because many consumers choose between coffee and tea, the coffee and tea demand functions depend on both prices. Suppose the demand curves for coffee and tea are

where \(Q_{c}\) is the quantity of coffee, \(Q_{t}\) is the quantity of tea, \(p_{c}\) is the price of coffee, and \(p_{t}\) is the price of tea. These crops are grown in separate parts of the world, so their supply curves are not interrelated. We assume that the short-run, inelastic supply curves for coffee and tea are \(Q_{c}=45\) and \(Q_{t}=30\). Solve for the equilibrium prices and quantities. Now suppose that a freeze shifts the short-run supply curve of coffee to \(Q_{c}=30\). How does the freeze affect the prices and quantities?

Transcribed Image Text:

- Q120 2p + Po Q = 90 - 2pt 90-2p+ Po