
According
to
our
standard
model
of
supply
and
demand,
which
of
the
following
definitely
predicts
an
increase
in
both
the
current
price
of
coffee and
the
current
quantity
of
coffee
produced?
An
increase
in
wages
paid
to
workers
on
coffee
farms.
An
improvement
in
coffeegrowing
weather
in
coffeegrowing
countries.
Correct
Answer'
_
An
increase
in
incomes,
assuming
coffee
is
a
normal
good.
[
A
decrease
in
the
price
of
tea.
The
expectation
that
Brazil's
coffee
harvest
will
be
especially
large
next year
See
your
notes
from
tutorial.
In
a
perfectly
competitive
market,
market
(inverse)demand
is
P(Q%)=300/5

Q4/5
while
market
(inverse)supply
is
P(Q%)=
60/4
+
Q%/4.
What
is
the
equilibrium
price?
¢
Round
to
two
decimal
places.
If
your
answer
is
1.125,
enter
1.13.
¢
Do
not
enter
a
currency
symbol.

Correct
Answer
40
Method
1,
invert
both
equations
to
get
quantity
as
a
function
of
price.
Set
them
equal
to
each
other
and
solve
for
price.
Method
2:
Set the
given
equations
equal
to
each
other
to
get
the
equilibrium
quantity.
Insert
equilibrium quantity
into
either
of
the
given
equations
to
get
equilibrium
price