4 Explain why each of the following is false a A freeze in B

4. Explain why each of the following is false:

a. A freeze in Brazil\'s coffee-growing region will lower the price of coffee.

b. \"Protecting\" American textile manufacturers from Chinese clothing imports will lower clothing prices in the United States.

c. The rapid increase in college tuitions will lower the demand for college.

d.The war against drugs, with increased interdiction of imported cocaine, will lowei.the price of domestically produced marijuana.

Solution

a)A freeze in Brazil\'s coffee growing region will reduce the production of coffee there. As Brazil is a major coffee producer of the world, this will reduce availability or supply of coffee in the world. Under the economic principle of downward sloping demand curve this will tend to increase the market prices of coffee. As per this , other factors remaining constant, the quantity of a product demanded or purchased by customers decreases with increase in prices. This implies that suppliers can sell higher quantities at lower prices and lower quantities at higher prices. As with reduced production of coffee, the coffee growers will have lower quantities to sell, they can sell all the quantities of coffee they have at higher prices. Under principles of economics, the coffee growers will charge the highest prices they can get for the available quantity of coffee the world prices of coffee will rise.

b)Protecting” America from Chinese clothing imports will reduce the supply of clothing in

the United States,thereby, increasing, not decreasing its price

c)A rise in college tuitions (fees) will reduce the quantum of college tuition demanded.

But this is not the same as a reduction in demand.

We have here a movement along the demand curve, as the quantity demanded responds to a change in price. Suppose the demand was to change, this would be a shift of the demand curve, as one of the elements underlying the demand curve (like average incomes, population, prices of related goods) would have changed

d)The war against drugs, by reducing imports of cocaine, will cause a reduction in thesupply of cocaine .Marijuana is a related commodity of cocaine, so as the price of cocaine increases, hence the price of domestically produced marijuana will be higher.The war against drugs has made drugs a very lucrative item