The Market for Columbian Coffee Beans Is Given in the Diagram

question 10

Essay

The market for Columbian coffee beans is given in the diagram below.The market is currently in equilibrium with a price of P₀ and a quantity exchanged of Q₀.Suppose that the Columbian government takes over the production and distribution of all coffee beans grown in Columbia.In an effort to increase revenue from the sales of coffee beans, the government decides to raise the price above P₀.Describe why it would take more effort for the government to raise the price to P₂ than it would for it raise the price to P₁.

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Definitions:

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