A Shift On The Supply Demand Curve Essay

1017 Words Nov 16th, 2015 5 Pages
A shift on the supply demand curve will have an effect on the pricing of coffee, as supply increases the price of coffee will decrease. The increase of coffee supply from 1997/8 to 1998/9 is an example of this, using data collected by the ICO, as supply increased from 99,550 (in thousand 60kg bags) in 1997/8 to 108,858 (in thousand 60kg bags) in 1998/9 this can be explained due to an increase in suppliers with the addition of Yemen, Guyana and Loa. The increase in coffee supplying countries will effect total production by adding to the market, simultaneously additional competition in the market will encourage other exporting countries to further increase their productivity and therefore supply. Alongside this 1998 saw the beginning of a decline in cost of labour, 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) and continued to decline. 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 would encourage importing countries to demand more coffee of the exporting countries as stock whilst labour is on the decline. Furthermore, demand in coffee only marginally increases from 64,904 in 1997 to 66,566 in 1998. The incline can be explained by an increase in population and customer preferences as a larger variety of coffee…

Related Documents