Question

A newspaper reported that 'The world market for coffee has returned to equilibrium'.

Which situation supports this statement? *
(1 Point)
A sequence of poor harvests resulted in shortages.
Decreased transport costs led to a surplus of supply
Farmers matched demand by planting more coffee bushes.
The price of coffee was fixed between producers.

Answer 1

Farmers matched demand by planting more coffee bushes.

Step-by-step explanation:

A market being in equilibrium means precisely that supply and demand are equal, and that the price of the coffee is the market clearing price, or the market-equilibrium price.

If demand was higher than supply, then, prices would rise, incentivizing producers to supply more of the good in order to take advantage of the higher prices and earn more income. This is what happened in this example, farmers saw the higher demand, and matched that demand by planting more coffee bushes, bringing the supply of coffee to the same amount as the demand of coffee, leading to equilibrium in the market for coffee.