Ex.18. With your group mates do the following

1. Analyze the effect, in the short run only, on the price of coffee of (i) a severe frost; (ii) a fall in the rate of VAT; (iii) the introduction of rationing.

· You are not expected to have a detailed knowledge of the coffee industry.

· Apply your understanding of general supply and demand analysis.

· Make assumptions about the price elasticity of supply and demand for coffee and then draw flat or steep curves to match.

2. Explain why the prices of some commodities fluctuate more than those of others.

· Explain why unstable conditions of supply and demand result in price changes.

· Explain why price inelasticity amplifies the effect on price of changes in supply and demand.

· Make use of graphs and relevant examples.

Ex.19. Explain the following sayings in your own words. What other sayings on the topic do you know?

1. Supply always comes on the heels of demand. Robert Collier, American motivational author, (1885-1950)

2. As scarce as truth is, the supply has always been in excess of the demand. Josh Billings, American humorist (Henry Wheeler Shaw) (1818 – 1885).

3. As the economy grows, so will the demand for energy. Cliff Stearns, the U.S. Representative for Florida's 6th congressional district, (1941)

4. A variety of factors contribute to the price of gasoline in the United States. These factors include worldwide supply, demand and competition for crude oil, taxes, regional differences in access to gasoline supplies and environmental regulations. Gary Miller, the U.S. Representative for California's 42nd congressional district, (1948)

5. It's the law of supply and demand. Demand is down, supply is up, so the price is down. Andrew Harrington, Economist,Australia & New Zealand Banking Group Ltd