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Which following change in the coffee market would shift the supply curve to the right? A
Which following change in the coffee market would shift the supply curve to the right?
A. A study finds that drinking coffee leads to higher grades.
B. The wage for employees in the coffee business decreases.
C. The income in the economy increases.
D. Firms expect the price of coffee to increase in the future.
E. Fifty Starbucks coffee shops close down.
Expert Solution
- The correct answer is B. The wage for employees in the coffee business decreases.
In a ceteris paribus assumption, the shift of the supply curve to the right means lowering the prices and increasing the quantity supplied. The lowering of prices will have a direct effect on the labor side as it also lowers the wages of the employees. The lowering of wages reduces the production cost, which means higher profitability on the part of the producers. Hence, they supply more coffee. Accordingly, if we supply more of a particular product, the supply curve will shift to the right.
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