In economics, they say a picture is worth a thousand words.Below, you will find two scenarios. Your assignment is to discussthe situation by writing the solutions, and then show the solutionsand how you got here in one or more graphs or flowcharts. ScenarioOne Supply and demand are foundational concepts in understandingeconomic theory. Whether you are a coffee drinker or not, you havebeen tasked to examine the impact of supply and demand when dealingwith the coffee retail industry. A few companies probably come tomind. Pick a major coffee retailer and the contemplate what hasbeen happening to both the supply and demand for this product. Tobegin, the following scenario deals with what happened in thecoffee industry at the beginning of last decade: In the early partof the last decade, there was an overproduction of coffee. Theprice dropped so low that producers’ costs were higher than themarket price. The reason this happened was that market pricesbecame high before this, and the supply of coffee increasedsubstantially. In the meantime, demand for coffee and everythingelse remained the same. Coffee prices, as a supply input, wentdown. In the meantime, gourmet coffee houses began appearing, whichbegan charging a premium for coffee in the period of decreasingprices. Gourmet coffee houses tend to open in high-rent areas andcater to higher income consumers. Because of the change theycreated for taste and preferences and the higher income market, thegourmet coffee houses had a win-win in a period of fallingwholesale prices and increasing retail prices. Explain the changesin the supply and demand creating a supply and demand curve basedon the above information. In this graph, be sure to demonstrate howthese changes affected the price and quantity levels of supply anddemand. Based on this analysis, how were coffee retailers faring inthe marketplace? Now, fast forward to the current conditions in thecoffee retail industry. Based on your research of your coffeeretailer, what types of changes are occurring as they relate tosupply and demand?
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