Essay about The Price Of Coffee Beans

1142 Words Aug 30th, 2015 null Page
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 rise by $0.01? Explain.
The law of demand states that when the price of an item goes up, the quantity purchased of that item goes down (Boyes, 2012, p. 202). When the price of coffee beans is increased by $0.20 per pound, this increase in the price of coffee beans will definitely have an impact on the price of roasted coffee in the form of higher prices for the product on store shelves. Another scenario is that if coffee prices are anticipated to increase in the future, there will be an increase in demand, as consumers will want to purchase as much as they can prior to the increase in price. In addition, there will be a decrease in supply, as companies will want to retain as much coffee as possible to sell it at as higher price in the future. This scenario will bring about a shift to the right of the demand curve, and a shift to the left on the supply curve. As in any situation where the cost of a product increases, consumers may purchase the product paying the higher price; however, the price the demand for roasted coffee will decrease, following the law of demand. If in fact one pound of coffee produces 50 cups of coffee the price of a cup of coffee may not increase by $0.01. Any change in the price of one cup of coffee will be dependent…

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