...Coffee Supply and Demand Besides the high demand and cost for gasoline these days, coffee is considered the second most traded commodity on worldwide markets next to oil. "Coffee is grown in more than 50 countries in a band around the equator and provides a living for more than 20 million farmers. Altogether, up to 100 million people worldwide are involved in the growing, processing, trading and retailing of the product" (Spilling the Beans , ). In 2001, coffee farmers and plantations produced over 15 billion pounds of coffee while the world market only bought 13 billion pounds. The overproduction in the coffee industry is not a usual thing and is one of the major reasons why prices vary throughout the industry. One of the major corporations today that is trying to control a large portion of the supply of coffee is Starbuck. Starbucks Corporation is the leading retailer, roaster and brand of specialty coffee in the world. Starbucks purchases, roasts, and sells whole bean and rich-brewed coffees, espresso beverages, cold blended beverages, an assortment of food items, coffee-related accessories and equipment, a selection of quality teas and a line of compact discs. Starbucks has over 8,700 retail locations in North America, Latin America, Europe, the Middle East, the Pacific Rim and is continuing to grow. When coffee is considered Starbucks has developed a worldwide name for itself and has become a huge success. An article in the Seattle Post, describes the alliance that Starbucks...
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...Matthew Giebel ECO-102-AC01 M,W,F 11-11:50 a.m. The documentary “Cappuccino Trail – Tales from Global Economy in a Cup” is an example of supply and demand. The demand for coffee today is huge. So huge that it is second only to oil as the most globally traded commodity on the market. A chain like Starbucks sells to about 14 million customers a day for cups that are 99% water making for a 2000% mark-up. This being said the locations with the perfect climate and elevation are limited. The “coffee belt” as it is called is 15-16,000 feet above sea level with plenty of sun and rain providing for over 200 brands. The people who live in these conditions have embraced the opportunity to farm the land as much as possible to make a descent living in a place that would otherwise have little option. When the supply of coffee is abundant all is well. However if too much coffee is available the shelf price stays the same but the farmers have to sell for much less. When this happened in Brazil they opted to fix the saturation of supply by burning a bunch of beans. On the other hand when there is a cut in supply from a natural disaster, like the one that happened in Peru from the effects of El Nino that wiped out a train that carried the supply the market price shot up. Sometimes the market will go up just because a renowned analyst scouting the commodities market gives a positive projection, as was the case in 1997 the cost went from $1.20 to $3.18. This makes the producers very happy but...
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...Kasetsart J. (Soc. Sci) 33 : 142 - 151 (2012) «. ‡°…µ√»“ µ√å ( —ߧ¡) ªï∑’Ë 33 : 142 - 151 (2555) Demand Analysis of Ethiopian Coffee in Japan Wolday Gebrehiwot1,* and Apichart Daloonpate2 ABSTRACT Ethiopia is the largest coffee producer in Africa. One of the major markets for Ethiopian coffee is Japan. This paper, therefore, analyzed the determinants of demand for Ethiopian coffee in the Japanese market. The Linear Approximate Almost Ideal Demand System (LA/AIDS) model was used to estimate a system of expenditure share equations for Ethiopian coffee and its competitors. Quarterly time series data from 1988 to 2009 were obtained for the analysis. Empirical results indicated that most of the slope coefficients were statistically significant and in accordance with microeconomic theory. The demand for Ethiopian coffee was determined by its price, price of substitutes, the contamination dummy variable, and total expenditure in the Japanese market. Ethiopian coffee demand was found to be elastic and this has an implication in pricing policy. Keywords: Linear Approximate Almost Ideal Demand System (LA/AIDS), expenditure share, coffee, Ethiopia, Japan ∫∑§—¥¬àÕ ‡Õ∏‘‚Õ‡ªï¬‡ªìπª√–‡∑»ºŸº≈‘µ°“·ø√“¬„À≠à∑ ¥ â ’Ë ÿ „π∑«’ª·Õø√‘°“ Àπ÷Ëß„πµ≈“¥À≈—°¢Õß°“·ø®“° ‡Õ∏‘ ‚ Õ‡ªï ¬ §◊ Õ ª√–‡∑»≠’Ë ªÿÉ π ß“π«‘ ®— ¬ π’È ∑”°“√ «‘ ‡ §√“–Àå ªí ® ®— ¬ ∑’Ë ‡ ªì π µ— « °”Àπ¥Õÿ ª ß§å ° “·ø®“° ‡Õ∏‘‚Õ‡ªï¬„πµ≈“¥≠’˪ÿÉπ ‚¥¬„™â·∫∫®”≈ÕßÕÿª ß§å ‡™‘ ß ‡ â π „°≈â ¡∫Ÿ √ ≥å „ π°“√ª√–¡“≥√–∫∫ ¡°“√ à«π·∫àß§à“„™â®à“¬ ”À√—∫°“·ø®“°‡Õ∏‘‚Õ‡ªï¬·≈–...
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...study on Starbucks Coffee Managerial Economics KPA1113 Hani Norhidayah Ismail KBA 15022 Faculty of Industrial Management, UMP Prepared for, Mr. Mohd Hanafiah Ahmad Semester I 2015/2016 Table of content Company Summary: Starbucks Coffee 2 Elasticity 2 Price elasticity of demand 3 Cross-price elasticity of demand 5 Income elasticity of demand 6 References 7 Company Summary: Starbucks Coffee Their story began in 1971 where they were a roaster and retailer of whole bean and ground coffee, tea and spices with a single store in Seattle’s Pike Place Market. Today, they connect with millions of customers every day with brilliant products and more than 21,000 retail stores in 66 countries. Starbucks is named after the first mate in Herman Melville’s Moby Dick. Their logo is also inspired by the sea –featuring a twin-tailed siren from Greek mythology. Their mission is to inspire and nurture the human spirit – one person, one cup and one neighbourhood at a time. They believed in serving the best coffee possible. It's their goal for all of the coffee to be grown under the highest standards of quality, using ethical sourcing practices. Their coffee buyers personally travel to coffee farms in Latin America, Africa and Asia to select the highest quality beans (Starbucks, 2015). Elasticity Elasticity is defined as how much consumers and producers will respond to a change in market conditions. The concept can be applied to supply or demand, and it can be...
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...Terry Martin ECO/561 April 22, 2014 Eric Hogan Market Equilibration Process Supply and demand is considered one of the most important factors of economics. According to www.ingimayne.com, supply and demand set the price and the amount of a good that will be produced. For instance, if the demand is high the price will less, but when the price is high the demand the demand will be less. In addition, demand is the quantity of a product or service desired by the buyer and supply is how much the market can actually offer. This is also called the supply relationship. In my paper I will explain how the coffee prices rose in 2011 due to the increase demand and reduced coffee supply. In 2010, coffee prices increased more than fifty percent causing the price of coffee to rise tremendously. The short supply of Arabic coffee bean varietals are used for many gourmet coffee, premium coffee, and specialty coffee. They are used by Starbuck’s, Community Coffee, and other major coffee roasters and retailers. With the increase in professionals the demand for premium coffee has increased as well. In Brazil, India, and China this trend is particularly noticeable, placing a huge demand on coffee beans. Starbucks controls about seventy percent of China’s market share in the coffee industry. However, green coffee beans decreased and the higher cost of coffee worked its way to grocery shelves and in coffee houses and cafes across the country as well as the United States. For instance, Starbucks...
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...A System Dynamics Study of Instability in the Colombian Coffee Market by Juan Fernando Perez Velasquez Thesis Submitted in Partial Fulfillment of the Requirements for the Degree of Master of Philosophy in System Dynamics System Dynamics Group Department of Geography University of Bergen 2010 Abstract The coffee market in Colombia is highly unstable, being more unstable in the last 20 years (since the removal of the ICO agreement). During 1980 and 1990 the coffee price was varying around 8% around a mean and over the last 20 years it has been oscillating around 15% to 20% around a mean. The coffee market presents an 8 to 11 years cycle in price and production. Coffee market is well known for its volatility and for the crisis that producers are confronting, i.e., poverty, low prices, etc. The main causes for this crisis are the characteristic behaviors of the coffee market itself, which presents price instability, resource unsustainabillity, and inequity along the commodity chain (specially for coffee growers), the same characteristics of other commodity markets. In this paper we focused on the first of the causes, price instability, and so we created a System Dynamics model of the Colombian coffee sector that captures the structure of that market, the delays and feedbacks present on it. With this research we intended to answer the following questions: Why is the Colombian coffee market so unstable in price and quantity? And what can be done to reduce the instability...
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...Below, you will find two scenarios. Your assignment is to discuss the situation by writing the solutions, and then show the solutions and how you got here in one or more graphs or flowcharts. Scenario One Supply and demand are foundational concepts in understanding economic theory. Whether you are a coffee drinker or not, you have been tasked to examine the impact of supply and demand when dealing with the coffee retail industry. A few companies probably come to mind. Pick a major coffee retailer, and then contemplate what has been happening to both the supply and demand for this product. Next, analyze the following scenario that deals with what happened in the coffee industry at the beginning of the last decade: In the early part of the last decade, there was an overproduction of coffee. The price dropped so low that producers' costs were higher than the market price. The reason this happened was that market prices became high before this, and the supply of coffee increased substantially. In the meantime, demand for coffee and everything else remained the same. Coffee prices, as a supply input, went down. In the meantime, gourmet coffee houses began appearing, which began charging a premium for coffee in the period of decreasing prices. Gourmet coffee houses tend to open in high-rent areas and cater to...
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...Below, you will find two scenarios. Your assignment is to discuss the situation by writing the solutions, and then show the solutions and how you got here in one or more graphs or flowcharts. Scenario One Supply and demand are foundational concepts in understanding economic theory. Whether you are a coffee drinker or not, you have been tasked to examine the impact of supply and demand when dealing with the coffee retail industry. A few companies probably come to mind. Pick a major coffee retailer, and then contemplate what has been happening to both the supply and demand for this product. Next, analyze the following scenario that deals with what happened in the coffee industry at the beginning of the last decade: In the early part of the last decade, there was an overproduction of coffee. The price dropped so low that producers' costs were higher than the market price. The reason this happened was that market prices became high before this, and the supply of coffee increased substantially. In the meantime, demand for coffee and everything else remained the same. Coffee prices, as a supply input, went down. In the meantime, gourmet coffee houses began appearing, which began charging a premium for coffee in the period of decreasing prices. Gourmet coffee houses tend to open in high-rent areas and cater to...
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...Coffee Consumption Patterns Kristi Mouton ECO365 Monday, May 28, 2012 Professor Lisa Messemer Coffee Consumption Patterns People across the globe consume various products on a daily basis. How much and how often goods are consumed can depend on several factors that can build on each other or act independently to influence an individual. It is these causes that set a precedent for what consumers will purchase and the amount of products to be produced by manufacturers and farmers. This is known as economic consumption patterns, and these patterns are thoroughly reviewed by economists. Economists use the results of the evaluation to provide the economy with information regarding the supply of products and services, and the demand for those products and services. In review of recent consumption patterns, the coffee market has experienced many changes according to an article written by Daniel Harrington. The article was titled “Coffee Prices 2011-2012 – Coffee Price Increase – Coffee Shortage”, which detailed the various aspects that are altering the standard consumption patterns in the economy for coffee. Coffee has a reliable and growing economic utility. In other words, the level of satisfaction received when people drink coffee has remained elevated over the years. In addition, there are more consumers in our economy that are broadening the types of drinks they ingest with coffee, and the wide variety of coffee drinks that are offered. This has aided in the increase of...
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...Coffee Supply and Demand It was always well known that there is very high demand of gas in United States! After gasoline the next product that is high in trade with other countries is coffee. It grows in more than 55 countries across the world and supports lives of around 23 million people in farming sector. More than 115 million people in the world have their involvement in business of coffee. Growth, process, trade, and retail of coffee are the different stages all these people are involved in. In 2002, people around the world bought 14 million lbs of coffee, while around 17 million lbs was grown. This over production isn’t usual and leads to variation of price in the entire coffee industry. A world wide known firm, Starbucks, is the most popular corporation in today’s market. It is known for controlling a major part of coffee that’s being produced. In fact, Starbucks is the lead corporation in retailing of this product. It offers people a special braded coffee. They start by purchasing, roasting and then finally selling whole coffee beans and rich brewed coffee, espresso drinks, cold-blended drinks, and a variety of fresh made items, equipments, and a wide variety of high-quality teas. They have more than 9000 retail locations worldwide. When people consider coffee, Starbucks has gained a worldwide name by leading with high success. It was mentioned in a news article that Latin America is where Starbucks has been producing huge amounts and quality of coffee for ensuring...
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...CH2 1. Suppose the demand curve for a product is given by Q = 300 – 2P + 4I, where I is average income measured in thousands of dollars. The supply curve is Q = 3P – 50. a. If I = 25, find the market clearing price and quantity for the product. Given I = 25, the demand curve becomes Q = 300 ( 2P + 4(25), or Q = 400 ( 2P. Setting demand equal to supply we can solve for P and then Q: 400 ( 2P = 3P ( 50 P = 90 Q = 220. b. If I = 50, find the market clearing price and quantity for the product. Given I = 50, the demand curve becomes Q = 300 ( 2P + 4(50), or Q = 500 ( 2P. Setting demand equal to supply we can solve for P and then Q: 500 ( 2P = 3P ( 50 P = 110 Q = 280. c. Draw a graph to illustrate your answers. It is easier to draw the demand and supply curves if you first solve for the inverse demand and supply functions, i.e., solve the functions for P. Demand in part (a) is P = 200 ( 0.5Q and supply is P = 16.67 + 0.333Q. These are shown on the graph as Da and S. Equilibrium price and quantity are found at the intersection of these demand and supply curves. When the income level increases in part (b), the demand curve shifts up and to the right. Inverse demand is P = 250 ( 0.5Q and is labeled Db. The intersection of the new demand curve and original supply curve is the new equilibrium point. 2. Consider a competitive market for which the quantities demanded and supplied...
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...Supply, Demand and Price Elasticity Team H ECO/212 Supply, Demand and Price Elasticity With the economy growing bigger and bigger, all the commodities that people rely on to go about their day to day lives does too. One commodity that people must have even if prices rose or drop is coffee. Team B will discuss the causes for shifts in supply and demand and how the shifts influence price, quantity, and market equilibrium. We will determine if coffee is a necessity or a luxury product, and identify the availability of a substitute. Last the discussion of necessity of coffee and the availability of the substitute and how it impacts the price elasticity. Webster New World Finance (2003) describes coffee as one of the most popular drinks in the world. The coffee bean is not grown in the United States but in tropical climates such as Asia, Africa, and S. America. Multiple causes can affect the shift in supply and demand of coffee. One factor that can affect supply is production surplus of coffee. According to Cruel (2002) Vietnam is almost producing more of the product than the second largest producer for the world, which is Colombia. Calculations from traders’ of the commodity expect it to grow worse as 2003 production of coffee was 10% higher than market absorption Cruel (2002). A second factor that can affect shift in supply and demand is decreased demand in the form of substitution. Energy drinks, colas with caffeine, and even bottled...
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...Market Demand and Elasticity Tank Up is a local quick mart gas station on Route 12, a fairly busy highway most days of the week. Tank Up is the last station eastbound just prior to the entrance ramp to the expressway. This location benefits Tank Up business because drivers often stop in to fill their gas tank and grab a cup of coffee before beginning their journey on the expressway. To increase profits, I am evaluating a price change for coffee. Historically Tank Up sells approximately 300 cups of coffee per day. At $0.79 per cup, annual coffee revenue is $86,268. Options to increase revenue include a) an increase in sales prompted by a price reduction or b) an increase in revenue through a price increase. For the purpose of this evaluation, it is assumed all factors beyond cost per cup and consumer demand are held constant. The supply costs for coffee beans, creamer, cups and other supplies are not a factor in this assessment. Below are the factors considered. Price Elasticity of Demand As noted above, annual coffee revenues are estimated at $86,268. To evaluate price elasticity of demand, a calculation was required to determine if an adjustment in price (increase/decrease) resulted in a change in consumer demand. The first step was to evaluate the impact of increased sales because of price reduction. When reducing the price per cup 13% (to $0.69) sales increased 7% (320 cups per day). Although demand increased, annual revenue declined 7% ($5,897). This change...
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... Next to oil, coffee is the world’s second most traded commodity. Sold in over 50 countries, the farmers who produce coffee are in the millions. Furthermore, there are over 100 million people involved in the growing, producing, trading and retailing of coffee, and over 15 billion pounds of coffee being produced yearly. From a bird’s eye view, the law of supply is working perfectly. Consumption however, is at 13 billion pounds a year. This dispersion in production is why the coffee industry is not the text book example of supply and demand. This dispersion is also the reason for price variations worldwide. The leading retailer of coffee worldwide is Starbucks. Once a small coffee shop in Seattle Washington, Starbucks now purchases, roasts and sells whole bean, brewed, espresso and cold blended coffees, not to mention food and non-food related items which cover their counters in each of the 8,700 retail stores in North America, Latin America and the Middle East as well as the Pacific Rim. This world wide spread of consumers helps Starbucks somewhat control supply and demand. Be as this may, other factors also influence the rise and fall of the supply and demand of coffee. The law of demand provides that as long as price of a product remains low, demand will remain high. Coffee however, seems to distort this fact. The determinant factors which have an effect on the prices of coffee are one of the several reasons why coffee prices and demand remain somewhat...
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...The coffee market case study 1. The nominal and real prices of a product are two very different things. Nominal refers to the price of the product at a given period of time. However the real price of the product is the nominal price which has been adjusted due to changes that happen in the economy such inflation. This happens because, over time the prices of products rise and the value of money falls. Therefore expressing prices over a long period of time can sometimes be misleading. The peaks and troughs show when coffee prices were very high and when they were very low. When the real price of coffee is calculated, taking the nominal price in 1970 and multiplying it by the 2010 price, it shows that the 2010 price has fallen, which means coffee has become cheaper. 2. Quantity demanded is the amount that customers actually purchased or wish to purchase. There are several key determinants of demand for green coffee; some of these include the price, income or wealth, the population of the country, taste, the environment or even various acts of government. Price Quantity demanded Price Quantity demanded The demand curve above shows the relationship between quantity demanded and price of coffee, holding all other factors, that the factors constant. Price Quantity demanded Price Quantity demanded The table above shows a shift the demand curve due to an increase of disposable income among a population 3. A. Demand for green coffee would...
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