Beruflich Dokumente
Kultur Dokumente
Changes in
Demand &
Supply and
Coffee Prices
Quantity Revenue
1.40 (billion for
Price
pounds coffee
($) per year Farmers
) ($)
1.00 E
1 10 10
0.5 15 7.5
0.50
0.25
D
0 5 10 12.5 15 2 Q/t
0
Million pounds of coffee per year
P = 0.50 , Q = 15
Price
($) If, over time, D shifts to D' and S
shifts to S', the world price of coffee
S falls to $0.50 per pound and the
2.00 quantity rises to 15 billion pounds per
year (shown by new equilibrium point E"
Price of coffee per pound
S’
1.00 E
0.50 E”
0.25
D’
D
0 5 10 12.5 15 2 Q/t
0
Million pounds of coffee per year
P = 1.5 , Q = 12.5
Price
($)
S
2.00
Price of coffee per pound
1.00 E
0.50
0.25
D’
D
0 5 10 12.5 15 2 Q/t
0
Million pounds of coffee per year
P = 0.25 , Q = 12.5
Price
($)
S
2.00
Price of coffee per pound
S’
1.00 E
0.50
0.25 E*
D’
D
0 5 10 12.5 15 2 Q/t
0
Million pounds of coffee per year
Curve Demand , Supply, and Coffee
Prices
Price
($)
S
2.00
Price of coffee per pound
1.40 E’
S’
1.00 E
0.50 E”
0.25 E*
D’
D
0 5 10 12.5 15 2 Q/t
0
Million pounds of coffee per year
Conclusion
• Elasticity. If there is availability of more close
substitutes in market, demand of good will be more
elastic and vice versa.
• Coffee has elastic demand (e > 1), therefore,
percentage change in price is greater than that in
quantity demanded. It is because in elastic goods,
consumers are responsive to price changes.
• Illustrates Elasticity of Coffee and Impact of Price
on Total Revenue :