Marketing

The Impact of
Coffee Beans on Price Elasticity
Charles Schredder
University of Phoenix



















Supply and demand significantly impacts prices, quantities, and market equilibrium.   Simply stated, market equilibrium occurs when a demanded quantity is equal to the supplied quantity of the same product.  
An example of market equilibrium was seen in the case of the coffee bean. During the fall of 2006, supply and demand of the coffee bean changed, affecting market equilibrium.   The production of coffee beans from two major world suppliers, Brazil and Vietnam, was reduced; the supply decreased in Brazil for economic reasons that started a decade earlier, and in Vietnam, the supply lessened due to harsh weather patterns throughout the year.   Concurrently, reduction in exported coffee beans from these countries resulted in a shortage of the world’s supply.   Meanwhile, in America, the shortage of coffee beans stimulated market price increases for the purchase of this import.   As a result, this increase also drove the cost of a Starbucks brand cup of coffee up roughly 11 cents.  
The market will always strive to eliminate surpluses and shortages to shift back to the market equilibrium.   Markets in equilibrium are maintained mainly through adjustments in product cost.   Neither buyers nor sellers make this decision; supply and demand make this determination.   When the price of a product, such as the coffee bean, is too low, consumers will eagerly purchase it. The supply is expended quickly, and the seller must increase the price to offset his or her...