This post goes over a common supply and demand shifters in a coffee market context, and how each of the following events will affect market for coffee: a) a blight on coffee plants kills off much of the Brazilian crop b) coffee workers organize themselves into a union and gain higher wages c) coffee is shown to cause cancer in laboratory rats d)price of tea declines e) Coffee prices are expected to rise rapidly in the near future These are all common questions you we see asking about possible shifts in supply and demand and there subsequent effect on equilibrium market price and quantity. First, if a blight kills off coffee plants then we will see a decrease in supply. This happens because productivity goes down (because the plants are GONE). Nothing happens to demand, so equilibrium price and quantity both go up. If coffee workers organize themselves into a union and gain higher wages, two possible things can happen. First, the price of inputs will go up, so supply will shift left (a decrease in supply). Second, it is possible that higher wages will result in an increase in income which will increase demand (shift it right). However, occasionally teachers are only looking for this first effect. In this scenario, if only the price of inputs rises, we will have the same equilibrium market outcome as the blight. But if income also rises, then we know price will go up, but we don’t know if quantity will increase, decrease, or stay the same without more information. If coffee is shown to cause cancer in rats, then people will be less likely to by it because they may fear that they themselves will get cancer. This results in a change in consumer tastes and preferences in a negative manner that decreases demand (shifts it left). A decrease in demand will lower both equilibrium price and quantity. If the price of tea declines, then the price of a substitute for coffee has gone down (if you agree that coffee and tea are substitutes). Since tea is now cheaper, more people will buy tea, and less will buy coffee. This results in a decrease in demand for coffee. The market results are identical to the cancer in rats example. Finally, if coffee prices are expected to rise in the near future then we will see an increase in demand (because people want to buy now before the price hike) and a decrease in supply (because firms want to hold onto it and sell it later at a higher price). This results in a rightward shift of the demand curve, and a leftward shift on the supply curve. The market results here are identical to the union pay increase example above. Thoughts?
a) what about if year before crop was so huge, supply is still large enough. Starbucks went up in price of their coffees when highs were October of 2014 and energy has certainly come down. You need an "f" for energy prices for transportation. b) is wrong assumption, coffee grown in very poor regions, they are like walmart, fire them and 100s line up for 10 jobs. c) You didn't get the memo? that was last weeks report on coffee and this week says coffee enemas cure cancer. d) tea? I drink that when sick but I need my two pots a day of coffee. e) I agree maybe cause am long, and bought 15 pounds of my favorite beans. About the only shift you find in coffee is not going to Starbucks and make it at home, I seldom get fancy drinks at Starbucks, loaded with calories, just need that Pikes.
Huh is this econ 101? I was looking for ENGL 111.301 https://www.english.upenn.edu/courses/undergraduate/2015/spring/engl111.301
I like medium blonde roast myself... Coffee is my crack.. are you actually long coffee? because as a consumer we are naturally short
My girlfriend is a bartista .. I get a elbow(lb) a week ... So in a sense by association I'm long starbux
Yes, actually long coffee, taken handful of attempts to find the lows, my style of trading is not for most, you learn to love to lose and lose often, but hedge best ways can, gets much tougher with light volume markets, but coffee is pretty good. Use yearly, monthly, weekly, daily and two minute charts, each one offers different information required for my system to even get into trades, but once they all saying yes, keeps putting in orders. System is now automated, much less work.
I use options as hedges, program monitors when best time to either get out of the options as futures price gone far in black that not needed or took my losses in futures and trying to use options to recover losses.