Suppose the Indian Ocean tsunami destroyed coffee production

Suppose the Indian Ocean tsunami destroyed coffee production in Indonesia. On international coffee markets, this would cause

If firms expect lower prices in the future, this would be shown as

If the price of a good is currently above the good\'s equilibrium price, then

Solution

d. A leftward shift of the coffee supply curve.

(As the tsunami has caused destruction, the overall production of coffee will decrease)

b. An increase in the supply today.

(Expected lower prices are not beneficial for supplier, and hence they would increase the supply now in order to get higher prices)

c. Some buyers will not be able to buy as much they want, and will bid the price down.

(There will be excess supply and less demand. Buyers will bid prices down in order to buy more).

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