Question

Only during the month of March this year, Ralph’s cafe had a special of $2 per...

Only during the month of March this year, Ralph’s cafe had a special of $2 per coffee between 8am and 11am as opposed to $3. Assume the market of coffee is competitive, with an upward-sloped supply and a downward-sloped supply, this change in the equilibrium price from $3 to $2 could be due to:

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Answer #1

Answer - This change in the price can be due to the rise in the supply of coffee during this time period , or it can be due to fall in demand for coffee during this period.

The rise in supply will shift the supply curve to right leading to lower equilibrium prices and higher quantity. The fall in demand will shift the demand curve to left and will result in higher equilibrium price and lesser equilibrium quantity. Both of these reasons could be responsible for the fall in equilibrium price.

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