Coffee Supply, Demand and Price Elasticity Essay

Words: 1004
Pages: 5

Coffee Supply, Demand, and Price Elasticity
Team B: Walelia Naholowa’a, Priscilla Swanson, Delniece Williams, Nigel Sturge
Robert Coates
February 26, 2012

Coffee Supply, Demand, and Price of Elasticity Statistics show that over half of the American population consumes coffee on a daily basis. You may drink coffee hot, cold, mixed, or even in a frappuccino. Individuals are able to make coffee at home, or buy it on the go. Coffee provides people with caffeine, which ultimately gives energy for hardworking people all around the world. The main focus for this paper will cover the following topics, with coffee as the basis: causes for shifts in supply and demand, how coffee supply and demand influence price, quantity,
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The coffee provides these people their daily dose of caffeine that keeps them going. The substitutes for coffee can be tea, which is gaining a lot of popularity as it has lower amounts of caffeine and has other health benefits as compared to coffee. Also, the other substitutes for coffee in current market are caffeine shots like 5-hour energy supplements. These other substitutes for coffee are readily available in market and lots of people are switching from coffee to other supplements.
The necessity of a good by itself increases the price of the good but its availability is supposed to balance the things out and the availability of substitutes in the market keeps the price of the good in check in the market. Since price elasticity measures the responsiveness of the quantity demanded of the commodity when there is a change in price, the availability of substitutes makes the onset of equilibrium price easy and keeps the price elasticity in check. The reason for this is if the price of the coffee increases too much, if the proper substitutes are available as discussed above readily, people would switch over to the substitutes leading to lowering of demand and ultimately leading to the lowering of price for coffee back to the equilibrium price.
Now that we all have a better understanding of coffee, one can see just how influential this