Case Study

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Answer all questions.

Extract 1: Coffee prices on the rise

Coffee prices hit a record 14-year high this month, and it's only a matter of time before coffee lovers will have to pay more in stores and coffee shops. A series of bad news has affected the market for coffee – bad weather in South America is threatening crops; Brazil and Vietnam are talking about hoarding their stocks; and US stockpiles are reportedly at 10-year lows. Moreover, the current behavior of prices reflects uncertainties concerning short-term coffee supplies. As uncertainties persist, investors are placing significant bets on where prices are headed.

Adapted from (February 2011)

Figure 1: Coffee prices (cents per pound)

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| |(ii) |Compare the different demand elasticity concepts. |[2] |
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| |(iii) |Discuss the usefulness of demand elasticity concepts in explaining the strategies adopted by Starbucks to maximise its profit |[8] |
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|(c) |Discuss whether the different forms of government intervention in the coffee market have met the objectives of the Colombian and |[10] |
| |Venezuelan

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