Y6

Suppose that over the past ten years market equilibrium price of Kona coffee increased by 20% and the total number of pounds of Kona coffee sold on the market (equilibrium quantity) increased by 5%. Which one could cause the change in the market equilibrium: increase in supply, increase in demand, decrease in supply, decrease in demand? (Choose one) (1 points) Draw a graph with original supply, demand and equilibrium. Then show the shift that occurred, show new supply or demand (depending on your answer to parts 1) and the new equilibrium, mark old equilibrium as A and the new equilibrium as B. (8 points) Can you calculate price elasticity of demand for Kona coffee using points A and B (from part 2)? If yes, calculate it. (1 points) Can you calculate price elasticity of supply using points A and B? If yes, calculate it. (1 points) If you cannot calculate one of the elasticities, please explain why. (4 points)