The market for roasted coffee beans was in equilibriumpre-pandemic with Peq(coffee) = $3: Qeq(coffee) = 13. The
Question:
The market for roasted coffee beans was in equilibriumpre-pandemic with Peq(coffee) = $3: Qeq(coffee) = 13. The price ofraw coffee beans is $1.00. Then consider a supply shock: thepandemic has disrupted the supply chain for coffee beans, causingthe price of raw coffee beans to increase to $1.50 (da=+$0.50). The relevant elasticities are as follows:
own price elasticity of demand for coffee = -15/13, own priceelasticity of supply for coffee = 9/13, input price of elasticityof supply for coffee = -8/13
[Hint: Keep expressions in fractions until the end; it will beeasier than using decimals.] Use this formula, a denotes the inputprice.
formula for change in eqm price: dp/da = derivateS/derivateA //dD/dp - derivativeS/derivativepP
formular for change in eqm quantity = dD(p(a))/dp x dP/dA
Answer the following in the space provided:
1.) Calculate the change in the equilibriumprice and quantity of coffee due to increase in cost ofinput(dPeqcoffee,dQeqcoffee)
2.) Calculate the new equilibrium price andquantity of coffee after the change in cost of input