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Using the data in Extract E, draw a demand and supply diagram to show the likely effects of the estimated change in population for the 40–59 age group on the USA coffee market. - Edexcel - A-Level Business - Question 2 - 2019 - Paper 1
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Using the data in Extract E, draw a demand and supply diagram to show the likely effects of the estimated change in population for the 40–59 age group on the USA cof... show full transcript
Worked Solution & Example Answer:Using the data in Extract E, draw a demand and supply diagram to show the likely effects of the estimated change in population for the 40–59 age group on the USA coffee market. - Edexcel - A-Level Business - Question 2 - 2019 - Paper 1
Step 1
Draw the initial Demand and Supply Diagram
Answer
Start by sketching a standard demand and supply diagram. Label the vertical axis as 'Price' and the horizontal axis as 'Quantity'. The demand curve (D) will slope downwards from left to right, and the supply curve (S) will slope upwards. Mark the initial equilibrium point where the curves intersect as E1, with price P1 and quantity Q1.
Step 2
Interpret the shift in Demand Curve to the Left
Answer
According to Extract E, the population change for the 40-59 age group is estimated to decline by 1.2%. This decrease in population will likely lead to a reduction in demand for coffee among this age group. Therefore, you should shift the demand curve leftwards, indicating a decrease in demand. Label the new demand curve as D1.
Step 3
Identify the New Equilibrium
Answer
After shifting the demand curve to the left, the new intersection of the supply curve (S) and the new demand curve (D1) will create a new equilibrium point, E2. Mark this point and indicate the new equilibrium price as P2 and the new equilibrium quantity as Q2, which will likely be lower than Q1 due to the reduced demand.