Coffee Supply and Demand

921 Words Sep 8th, 2007 4 Pages
Coffee Supply and Demand Besides the high demand and cost for gasoline these days, coffee is considered the second most traded commodity on worldwide markets next to oil. "Coffee is grown in more than 50 countries in a band around the equator and provides a living for more than 20 million farmers. Altogether, up to 100 million people worldwide are involved in the growing, processing, trading and retailing of the product" (Spilling the Beans…, ). In 2001, coffee farmers and plantations produced over 15 billion pounds of coffee while the world market only bought 13 billion pounds. The overproduction in the coffee industry is not a usual thing and is one of the major reasons why prices vary throughout the industry. One of the major …show more content…
There is an invisible hand in economics that sees to it that what people demand matches what is available. When goods are limited the market reduces the quantity, as prices go up, people buy fewer goods and as goods become abundant, prices go down and people want more. Some factors that affect the demand curve are society 's income, the price of the goods, tastes, expectations and taxes. Supply the other the hand refers to a schedule of quantities a seller is willing to sell per unit of time at various prices. It is considered a mirror image of demand. Individuals again control the factors of production, inputs or resources necessary to produce goods. "Individuals ' supply of these factors to the market mirrors other individuals ' demand for those factors" (Colander, 2004). Just as demand, supply is fundamental to the invisible hand 's ability to coordinate an individual 's actions in the market. The main bases for the law of supply is on the firm 's ability to substitute production of one good for another or vice versa. Despite the many factors that affect supply and demand, Starbucks is in no way going to do any worse than its competitors in the coffee industry. Starbucks has turned itself into the Microsoft of coffee and as long as nothing too severe happens to our economy Starbucks can look forward to a prosperous
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