Consider the market of the two competitors, Tea and Coffee in Karachi. Suppose News reports claim that the consumption of Tea is good for the health of patients with coronavirus. What will be the short-run and the long-run impact of the News on Tea and Coffee sales in Karachi?

  1. Describe the method of Comparative Statics analysis; you would apply to analyze the market. (1 Mark, Maximum 150 words)
  2. In support of your answer apply comparative statics analysis, using clearly labeled two panel diagrams of demand and supply model, along-with brief explanations for (i) Short-run market changes due to ‘Rationing function of Price (ii) Long-run market analysis of ‘Guiding or Allocating function of Price’. (3 Marks, Maximum 200 words)
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