1. Assume initially that the demand and supply for premium coffees (one-pound bags) are in equilibrium. Now assume Starbucks introduces the world to premium blends, and so demand rises substantially. Describe what will happen in this market as it moves to a new equilibrium. If a hard freeze eliminates Brazil's premium coffee crop, what will happen to the price of premium coffee?

2. In late 2006 and early 2007, orange crops in Florida were smaller than expected, and the crop in California was put in a deep freeze by an Arctic cold front. As a result, the production of oranges was severely reduced. In addition in early 2007, President George W. Bush called for the United States to reduce its gasoline consumption by 20% in the next decade. He proposed an increased in ethanol produced from corn and the stalks and leaves from corn and other grasses. Illustrate what is the likely impact of these two events on food prices in the United States?