Demand For A Good? Essay

876 Words Dec 7th, 2015 4 Pages
Demand for a good is the various quantities that consumer will take of the market (per unit of time) at various prices, ceteris paribus (other determinants remain unchanged). Demand for coffee beans is relatively inelastic this means smaller percentage change in quantity demanded when the price change (fig.1). It is essential for the producer to know because elasticity of demand play a major role in total revenue. If PED for a product is inelastic (PED<1) this means by rising prices, the company increasing their total revenue. Inelastic demand also says that consumers will unlikely stop drinking coffee in a larger proportion to the price rise and vice versa. Coffee contains caffeine as everyone knows caffeine provoke addiction, this means coffee is addicted commodity and proportion of income spent on coffee is relatively small, people will continue buying coffee with the raised price ( Ex. The price was $3.00, new one is $ 3.50, 50p is a really tiny part of your income and you don’t buy a new pack of coffee every day).
Supply of coffee is relatively inelastic as well, because it is difficult to increase productions. The crop takes time to grow, roast and shipped to the producers of coffee in the UK.
In the year of 2014, there was a big drought in Brazil, where the large market share of Coffee is grown (one third of all coffee). All the suppliers expected the price rise because of the not suitable conditions for coffee crops. All the others suppliers of coffee beans wouldn’t…

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