Homework Ecn 211

B) Coffee raised at high elevations tastes better, advertisers often stress the fact that their coffee is

Formulate a reason why the elasticity of demand is an important consideration when analyzing the impact of a shift in supply and why the elasticity of supply is an important consideration when analyzing the impact of a shift in demand. Include at least one (1) example in each scenario.

A shift in either the demand or supply of coffee could be caused by a number of things. I will start with factors that could trigger a shift in the demand curve of my product of choice. The demand curve according to Mankiw (2008), shifts "if something happens to alter the quantity demanded at any given price." To begin with, customer preferences could bring about a shift in the demand for coffee. In this particular case, the amount of coffee consumers demand would increase were consumer's preferences to change in favor of coffee. The reverse is true. A shift in demand could also be brought about by changes in price of other related goods. Here, an increase in the price of complimentary goods, i.e. sugar would reduce the quantity of coffee demanded by customers of the same at any given price. On the other hand, was the price of a substitute good i.e. tea to increase, the quantity of coffee demanded (at the prevailing prices) would increase. The reverse is true in both instances. Changes in income could also lead to a shift in demand. As people's income increase, their demand for coffee would most likely increase and vice

Coffee is a commodity enjoyed all over the world. Bistros in Paris to large franchise chains in the United States; the fact is people love coffee. Take a look at the causes for shifts in supply and demand for one

This industry is enriched with enormous statistics of substitutes such as: water, tea, beer, juices, coffee, etc presented to the end-consumers.

b. The CPI does not allow substitution away from products with rising prices and has

1. Suppose the price of coffee beans increases by $0.20 per pound. What is the effect of this raw material price increase on the demand for roasted coffee? If one pound produces 50 cups of coffee, would the price of a cup of coffee rising by $0.01? Explain.

MC3.
The
demand
for
coffee
is
unit
elastic
and
coffee
is
a
normal
good.
Tea
is
often

The main objective of this report is to describe the change coming in the coffee industry due to limited supply with the help of economic models and concepts. For our analyses we undertake the concepts like demand and supply conditions, shortage, elasticity, and total revenue. We also examine the various other factors, which influence the total revenue, demand and supply curves and their elasticity like type of market and time period throughout this article.

A shift on the supply and demand curve will subsequently effect pricing, an example of this is the increase of coffee supply in 1998. Using data collected by the ICO, it is found that supply of coffee increased from 99,550 (in thousand 60 kg bags) in 1997/8 to 108,858 (in thousand 60 kg bags) in 1998/9. This can be explained due to an increase in suppliers with the addition of Yemen, Guyana and Loa, this will affect total production by increasing coffee producing countries, whilst simultaneously adding competition to the market consequently encouraging other exporting countries to increase productivity and therefore increasing supply. This increase in supply with an unchanged demand shall lead to a decrease in price. Alongside this 1998 saw the beginning of a decline in labour costs, information obtained by the ICO states that, the price paid to growers of coffee in Tanzania was at 90.70 (US cent/lb) when previously in 1997 it was up at 118.52 (US cent/lb). This could potentially be due to the boost in supply increasing competition between exporting countries for the steady incline in demand. Alternatively, it is possible the cheaper labour encouraged importing countries to invest in higher quantities of coffee from exporting countries whilst labour prices where on the decline. Furthermore, consumer demand in coffee in importing countries only marginally increased from 64,904 in 1997 to 66,566 in 1998. This incline can be explained by an increase in population and customer

1. Reduce the sales price of their high-volume IBI coffee in order to increase sales.

After reading this paper, drinking a cup of coffee will never be the same. Coffee has become a major part of many people’s lives. It is a global commodity. Behind the oil industry, coffee places second on the world’s most traded commodities. Every day more than 2 billion cups of coffee are consumed (“The Economics of Coffee”). The World coffee market is controlled by Kraft General Foods (produces Maxwell House), Proctor & Gamble (produces Folgers), Sara Lee (Chock Full O’Nuts) , and Nestle (“The Economics of Coffee”). These major producers and the World Trade Organization (WTO) control coffee prices. Coffee plays a crucial role in many countries economies. Some of these countries include Burundi, Uganda, and Ethiopia. Ethiopia is the

Starbucks is one of the leaders in the coffee house industry. This is possible because Starbucks is the leading purchaser of coffee worldwide. Despite this, the coffee house market as a whole must be aware of possible future volatility in coffee bean production. According to Philip Ross at the International Business Times, Arabica beans, which are 75% of the coffee produced worldwide, are expected to fall by up to 25% in some regions of the world. This is in part to the rising temperatures that those regions are facing. This will affect world prices, and as a result corresponding demand for the same.

Coffee becomes one of the most popular drinks in the world. More than 1.5 billion cups are drunk, every day, worldwide. Huge market.

2. Prices of Related Goods In case of substitutes, an increase (decrease) in the price of Pepsi leads to an increase (decrease) in the demand for the other good. For example, if the price of Coke increases, most consumers will begin to substitute Pepsi, because the relative price of Coke is higher than before. The quantity of Pepsi demanded will tend to increase as a result an increase price of Coke increases the demand