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"Using demand and supply diagrams explain recent changes in the price in coffee"

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Introduction

Economics "Using demand and supply diagrams explain recent changes in the price in coffee" Introduction A market exists wherever there are buyers an sellers of a particular good. Buyers demand goods from the market whilst sellers supply goods onto the market. Demand is the quantity of goods or services that will be bought at any given price over a period of time. The demand curve is downward sloping, showing that the lower the price, the higher will be the quantity demanded of a good. Demand curve Supply in economics is defined as the quantity of goods that sellers are prepared to sell at any given price over a period of time. The supply curve is upward sloping, showing that firms increase production of a good as its price increases. ...read more.

Middle

Equilibrium is the point where the demand and supply curves cross. This is the central point where expectations are being realised. The reasons behind the countries having a larger supply are that the coffee crop takes between 3-7 years before it is ready to be picked. In 1998 the market was at a point of equilibrium, the coffee that was planted back as far as 1991 was supplying the demand, but by 2000 the coffee they had planted was oversupplying the market. The market demand is around 1.6% per annum so the market is growing each year but not at a rate high enough to meet the supply. Demand is less than supply. Supply rising faster than demand In the coffee market there has been a significant rise in market supply this has caused a shape fall in the market prices. ...read more.

Conclusion

Also putting pressure on the price of coffee was the poorer producers offloading there excess output onto the market mean as the supply is higher the demand is lower so the price has to fall. Immediate supply- momentary supply is fixed Conclusion The major impact on the price of coffee is the over production. the market for coffee doesn't grow sufficiently per annum to take the large supplies of coffee that are coming into the market, as the supply exceeds the demand the price of coffee is brought down. The demand for coffee is relatively inelastic. The net result is a loss of total revenue for the main coffee producers many of whom have to exist on a very low income anyway. The countries that have been the major contributors to the market flooding have caused there own revenue to fall as well as the rest of the coffee markets. Scot Varley 1.36 Economics 06/05/2007 1 ...read more.

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Response to the question

This essay engages well with the question. It has a good introduction defining a market, and uses diagrammatical analysis strongly to show why shifts in demand and supply will cause a change in the equilibrium. If this essay wanted to ...

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Response to the question

This essay engages well with the question. It has a good introduction defining a market, and uses diagrammatical analysis strongly to show why shifts in demand and supply will cause a change in the equilibrium. If this essay wanted to go further, it could look at why developing countries tend to export products such as coffee and what effect the decreasing value is having on them. Also, an exploration of FairTrade would be something else which could be insightful.

Level of analysis

The analysis in this essay is sound. The explanation of a market is good, with an awareness of supply and demand. If I were doing this essay, I would've mentioned that where supply and demand meet is the market equilibrium, determining the price and quantity. This would've added clarity. I like how the diagrams are shown with a shift. When drawing diagrams in economics, always think of a shift you can draw. By doing so, you are automatically showing understanding of the model. This essay is missing a simple few sentences detailing what the diagram is representing, however. I would've written something like "The shift from D1 to D2, and S1 to S2 has caused equilibrium price to decrease from P1 to P2 and quantity to increase from Q1 to Q2. I liked how they noted that the shift in supply is larger than the shift in demand, as this shows understanding that the effect depends upon the size of the changes. I see this essay was submitted in 2004, but if it was more recent, I would've looked at how global recession has caused a vast decrease in demand, yet supply is still rising.

Quality of writing

The essay is structured well, having a clear introduction and conclusion. I like how the introduction defines the terms in the question, showing a good foundation of knowledge. The conclusion draws upon the analysis and poses an evaluative statement, showing the ability to make a conclusion based on evidence. It's always good to see significance explored! Spelling, punctuation and grammar are strong.


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Reviewed by groat 02/03/2012

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