Question

Problems and Applications

The quantity of coffee sold rose sharply last month, while the price remained the same. Five people suggest various explanations:
Sean: Demand increased, but supply increased at the same time.
Yvette: Demand increased, but supply was perfectly elastic.
Bob: Demand increased, but supply was perfectly inelastic.
Cho: Supply increased, but demand was perfectly elastic.
Eric: Supply increased, but demand was unit elastic.
Who could possibly be right?
A. Brian.
B. Crystal.
C. Edison.
D. Hilary.
E. Kevin.

Answer 1

Sean: Demand increased, but supply increased at the same time

Step-by-step explanation:

An increase in demand would lead to a rise in the quantity of coffee sold. This would lead to an increase in price and quantity of coffee demanded.

A rise in supply of coffee would lead to an increase in the quantity of coffee and a decrease in price of coffee.

Taking these two effects together, the effect of an increase in demand which led to a rise in price of coffee and the increase in the supply of coffee which lead to a fall in price would cancel each other and price would remain unchanged.