Question

Suppose that new medical research indicates that CONSUMPTION of Coffee can cause Colon Cancer, what economic...

Suppose that new medical research indicates that CONSUMPTION of Coffee can cause Colon Cancer, what economic effects regarding PRICE and QUANTITY of Coffee will this research have on :

a) DEMAND for Coffee

b) SUPPLY of Coffee.

Draw the two diagrams.

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Answer #1

In a research it has been revealed that Consumption of Coffee can cause Colon Cancer,

A) Demand of coffee- When consumers will get information about this then demand of coffee will decrease and shift backwards. Due to fall in demand of coffee , price and quantity of coffee will decrease. Same is shown in diagram.

B) Supply of coffee- Due to cooffee side effects , suplly will reduce by the firms and due to reduction in supply prices will increase and quantity will fall.

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