Determine the market equilibrium price for coffee beans

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Reference no: EM13193602

The market equilibrium price for coffee beans in Ecuador is $2.75/pound, a price at which growers are unable to make a profit. Due to the lack of profits, many growers have stopped production and the output of coffee beans has fallen from 400 tons per year to 250 tons per year. As a result of pleas from the growers, the government steps in and sets a floor price for coffee beans at $3.50/pound.

What market response would you expect from this government action?

How would supply, demand, and price change?

Use a graph to illustrate tha answer.

Reference no: EM13193602

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