HW 1 - Problem Set # 1 1. (12 points) For each statement...

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Problem Set # 1 1. (12 points) For each statement below describing changes in the coffee market, indicate whether the statement is true, false, or uncertain. Explain your reasoning in each case, using a graph as a part of your answer. 0 a. If consumer income increases and coffee worker wages fall, the quantity sold of coffee will rise and the price of coffee will fall. 0 b. If tea prices decrease and coffee worker wages increase, the quantity sold of coffee will decrease and the coffee of tangerines will increase. 0 c. If the price of coffee processing machinery increases and there are unfavorable media reports concerning possible harmful effects of the caffeine in coffee, both the quantity sold of coffee and the price of coffee will fall. 2. (20 points) Assume that there are 400 identical consumers each with the following inverse demand equation: P = 64 – 2q d . There are 40 identical firms each which supply the good according to the following supply equation: q s = P. 1 a. Derive the equations for the aggregate demand and supply curves. 1
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HW 1 - Problem Set # 1 1. (12 points) For each statement...

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