7. A severe frost hit Brazil in July 1975, damaging the coffee crop. The 1976 harvest was 9.5 million bags, down from the 1975 harvest of 23 million bags. Since Brazil is the world's leading coffee producer, there was a substantial reduction in the world supply of coffee in 1976. Use supply and demand analysis to describe:

(a) what happened to the price of coffee in 1976,

(b) the U.S. per capita consumption of coffee in 1976 compared to that in 1975,

(c) the price of tea in 1976,

(d) the revenues of coffee producers in 1976 (be careful).

Coffee is allocated by the market. Did the sharp reduction in supply create a shortage?

Why or why not?

Industrious students should obtain real-world data to back up their analysis.

Information on coffee prices and consumption for the United States is available in the Statistical Abstract of the United States (annual).