Consider the market for coffee, where the demand and supply equations are given by: Demand: Qd = 200 - 3P, Supply: Qs = 20 + 2P. If the supply of coffee increases due to favorable weather conditions, what happens to the equilibrium price and quantity?

Question

Price increases, quantity decreases
Price decreases, quantity decreases
Price decreases, quantity increases
Price increases, quantity increases

Answer 1

Price decreases, quantity increases

When the supply of coffee increases due to favorable weather conditions, the supply curve shifts to the right. This causes the equilibrium price to decrease and the equilibrium quantity to increase. Consumers benefit from lower prices and higher availability of coffee.