Assume initially that the demand and supply for premium coffees (one-pound bags) are in equilibrium. Now assume Starbucks introduces the world to premium blends, and so demand rises substantially. Describe what will happen in this market as it moves to a new equilibrium. If a hard freeze eliminates Brazil’s premium coffee crop, what will happen to the price of premium coffee?
Consider chip plants: potato and computer. Assume there is a large rise in the demand for computer chips and potato chips. a. How responsive to demand is each in the market period? b. Describe what a manufacturer of each product might do in the short run to increase production. c. How does the long run differ for these products?