Based on the article from http://www.wikinvest.com/commodity/Coffee, it shows that coffee bean can be affect the economy world and had already cause economic problem to both the buyers and suppliers. The coffee bean is one of the products for buyer daily life and for the suppliers as well for making income with it. The changes in economy can change the rate of sales on the coffee bean which means that when the price of the coffee bean is high, less people will buy or when the price is low, many people will start buying fast. These economic problems come from the concept of the demand and supply that are related to the coffee bean.
The law of demand shows that when the price is high, quantity of the product is low and if the price is low, the quantity of the product is high. The demand side show the buyers who wanted it, afford it and willing to pay for the product, it can cause economic problem like the demand for coffee had been dramatically increasing over the year from 2007 to 2008. The diagram below show the suppliers had forced to increase the pricing of the coffee up to 21% from the august 2007 to august 2008 so that to prevent any shortages of supplies.
The graph shows how the law of demand works when the coffee price is affected. When the price of the coffee is raise to the price of twenty, the quantity of it is drop to two units. This shows that if the price is high, the quantity of the coffee will drop. But, if the price of the coffee is drop to the price of ten, the quantity of the coffee will increase to eight units. It shows that when the price is decrease, the quantity of the coffee will increase.
The demands of the coffee beans are affected by the change in customer’s taste. The buyers had favorable change in tastes for products that have high quality and are desirable. This is cause of new product will cause the demand to increase like the coffee bean. The coffee store like the old town coffee shop had made a new coffee and consumer had been waiting to try out a better quality of coffee and demanding for it had greatly increase while other store like Starbucks coffee had greatly reduced. There is also the factor of preferences; the demand depends on this factor where buyers place value on goods and services. For example, both coffee and tea contains caffeine which helps consumer in staying awake or energetic. However, majority consumers prefer taking coffee rather than tea to stay awake or feeling more energy. Thus, coffee is more suitable rather than tea, the demand for coffee has greatly increased. The graph shows the increase of the price of their coffee also increase the quantity of the coffee as well when people start demanding coffee rather than tea.
The supply side that is the law of supply show if the price of the coffee is higher, the higher the quantity of the coffee is or the price of the coffee is lower, the lower the quantity of the coffee. For example, Aracbica and Robusta country coffee sold at 70% of the price of the Aracbina to four coffee roasting companies like Nestle, Kraft, Procter & Gamble and Sara Lee also show that the quantity of their coffee is high.
The graph show how the law of supply works when the price of the coffee is rise to the price of twenty, the quantity of the coffee will increase to the eight units. The opposite of it, when the price of the coffee is drop to the price of ten, the quantity of the coffee will drop to two units. The coffee will have a good and high quantity if suppliers have enough resources to make the coffee much better because if the price is high, the suppliers had enough resources to make better coffee with little customer. But, if the price of the coffee is low, the quantity will drop meaning that the coffee will not be as good as the store make because many people will be ordering more coffee when the price is low. Due to this, suppliers need to limit their resource which is the coffee bean in order to produce more for the customers.
The economic problem can also be found in the changes of the supply, the factor of state of nature. The nature are natural force that involve in production like rain or storm, the factor can cause economic problem to production of coffee bean. For example, in 2011 the supplies have been running low in Colombia due to the heavy rain that had been tarnishing the harvest on making arabica beans after in Brazil, Mexico and Vietnam. The state of nature had caused the supermarket to raise the coffee prices around the world like in March 2011 had increase the price of a 227 grams bag of ground filter coffee to $2.60 compared to the compare to 2010 the price was $2.28.
There is also factor of technology, it was mainly use for factor of production for producing goods. The technology had always found new method for producing product and may change their method of production to lower cost of production as time goes by new technology is introduce and various companies had constantly changing their technology and could result in changes in the production. For example, the coffee store like the coffee bean had found new method to produce their coffee bean more effectively and cut down production cost with the new and advance technology. This could cause changes in the coffee supply like when the coffee supply is low, the technology also decrease in production of coffee pr the coffee supply is high, the technology production of coffee increase.