Answer
a) The equilibrium price increases.
b) The equilibrium price increases, and total expenditures will increase.
c) The equilibrium price decreases, and total expenditures will decrease.
Work Step by Step
a) Please see the upper graph. Since there is a decrease in the quantity of coffee beans, the supply curve is shifted to the left. Thus, the equilibrium price increases, and the equilibrium quantity decreases.
b) Please see the upper graph. Coffee beans are an input for a cup of coffee. Since there is a decrease in the quantity of coffee beans, there will be a decrease in the quantity of cups of coffee. Since there will be a decrease in the quantity of cups of coffee, the supply curve is shifted to the left. Thus, the equilibrium price increases, and the equilibrium quantity decreases. Since the cups of coffee have inelastic demand, total expenditures on cups of coffee will increase with a price increase.
c) Please see the lower graph. Since there will be fewer cups of coffee demanded, this will shift the demand curve for donuts to the left. The equilibrium price will decrease, and the equilibrium quantity will also decrease.
With inelastic demand for donuts, a price decrease will cause total expenditures to decrease for donuts.
