Final answer:
The coffee market is affected by events that shift demand or supply curves, given an inelastic demand curve with an elasticity of 0.3. Increased tea prices, higher coffee wages, health concerns, expected price rises, and lower interest rates all have different impacts ranging from increasing to decreasing both the price and quantity of coffee.
Step-by-step explanation:
Considering that the demand for coffee is relatively inelastic, with an elasticity of around 0.3, different market events will cause shifts in supply and demand curves, influencing price and quantity. Here's how each event would graphically affect the coffee market: Price of tea increases: The demand curve for coffee will shift to the right as consumers substitute coffee for the now more expensive tea, raising the price and quantity of coffee. Coffee workers gain higher wages: The supply curve shifts to the left due to increased production costs, increasing coffee prices and reducing quantity.
Coffee is shown to cause cancer: The demand curve shifts to the left as consumers start avoiding coffee, decreasing its price and quantity. Expectation of rising coffee prices: The demand for coffee may temporarily increase as consumers and retailers stock up, shifting the demand curve to the right, leading to higher prices and quantity sold in the present. Decrease in interest rates: A lower interest rate can stimulate investment in the coffee industry, shifting the supply curve to the right, which might lower coffee prices and increase quantity, assuming demand remains unchanged.