Question

Problems 2–3 are based on the model of demand and supply for coffee as shown in Figure 3.10 "Changes in Demand and Supply". You can graph the initial demand and supply curves by using the following values, with all quantities in millions of pounds of coffee per month: (1 Point each)
Price     Quantity demanded Quantity supplied
$3                40                              10
4                  35                              15
5                  30                              20
6                  25                              25
7                 20                               30
8                 15                                35
9                10                                  40

Suppose the quantity demanded rises by 20 million pounds of coffee per month at each price. Draw the initial demand and supply curves based on the values given in the table above. Then draw the new demand curve given by this change, and show the new equilibrium price and quantity.

Suppose the quantity demanded falls, relative to the values given in the above table, by 20 million pounds per month at prices between $4 and $6 per pound; at prices between $7 and $9 per pound, the quantity demanded becomes zero. Draw the new demand curve and show the new equilibrium price and quantity.

Answer 1

P	QS	QD	QD'	QD''
3	10	40	60	40
4	15	35	55	15
5	20	30	50	10
6	25	25	45	5
7	30	20	40	0
8	35	15	35	0
9	40	10	30	0

The initial quantity equilibrium and price is denoted as Q=25 and P=6

When Quantity demanded rises by 20 million per price point the demand curve shifts to the right to D' where equilibrium quantity is 35 and P=8

When quantity demanded decreases by 20 at price point 4-6 and to 0 at price point 7-9 the demand curve will shift to the left to D'' and new equilibrium quantity is 15 and Price = 4