Consider the market for coffee.

a. Draw the supply and demand graph for coffee below assuming the market operates at an equilibrium price of $2.40 and an equilibrium quantity of 5,000.

b. Assuming tea and coffee are substitutes, what will happen in the market for coffee if the price of tea increases? Show the effects on your market graph, and explain in words.

c. Based on this information, will producer surplus in the market for coffee increase or decrease? Explain.