Essay about Supply, Demand and Price Elasticity of Coffee

1004 Words 5 Pages
When many individuals wake up in the morning, the first thought they often have is: where is the coffee? The price of coffee fluctuates no matter what quantity is sold. The following paper will discuss what makes the price of coffee rise and what consumers do when the price is more than they are willing to pay. Many factors are taken into consideration when the price of coffee is being determined. The main two factors are the supply that is demanded and the availability of substitutes, which will be discussed below. 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 …show more content…
Equilibrium is defined as the point of intersection of the supply and demand curves. The equilibrium price is the price where the quantity demanded (QD) matches the quantity supplied (QS). The equilibrium quantity is the quantity where price has adjusted so that QD = QS. At the equilibrium price, the quantity that buyers are willing to purchase exactly equals the quantity the producers are willing to sell. Actions of buyers and sellers naturally tend to move a market toward equilibrium. These shifts in the supply and demand of a product affect the price because when a resource is scarce, the price can be driven up, and when there is more of the product the price will go down, which means that coffee would be cheaper.
Several factors affect the supply and demand of coffee. Since coffee beans come from other countries the weather is a considering factor. These countries could have a very dry season, or a very wet season. It does not take much to cause an imbalance in a coffee growers’ crop. When the weather is a factor the demand will still be there, but the prices will increase. If we have plenty of this resource the price would decrease. Other possible factors would be if people chose to substitute coffee with other sources of caffeine such as energy drinks or sodas. If they do this the quantity of coffee will increase and the price will decrease allowing people to once again choose coffee instead of a substitute.
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