Question

The table below presents the demand and supply for coffee at coffee shops across the Carleton University campus.

Price	Quantity Demanded/Week	Quantity Supplied/Week
$5	6,000	10,000
$4	8,000	8,000
$3	10,000	6,000
$2	12,000	4,000
$1	14,000	2,000

a. What is the equilibrium price and equilibrium quantity?

b. Suppose in an effort to keep coffee affordable for students, the University's administration requires the price of coffee to be set at $2 at the start of the academic year. What imbalance would exist in the market for coffee on campus? What would you expect to happen to price as the academic year progressed?

c. Now suppose in an effort to ensure coffee shops were profitable, the University administration required the price to be set at $5 at the start of the year. What imbalance would exist in the market for coffee on campus? What would you expect to happen to price as the academic year progressed?

Answer 1