Commentary - This article talks about the clear and significant rise in price of coffee due to the increase in the demand for coffee and the increase of fuel prices.

Price increases are the result of higher demand worldwide. Coffee imports have increased by 23 percent over the last decade, according to data from the International Coffee Organization.

Meanwhile, coffee futures rose more than 50 percent in the past year.

"There's a world demand for better quality coffee," Dilworth Coffee's  said. "But then speculation multiplies it. ... What I hope is, somebody is going to lose their shirt."

Specialty roasters used to be the only group buying top-quality beans. King said that has changed over the past two decades.

"We've got the big guys in there buying the good stuff, too," King said.

High demand for quality coffee has made it difficult for smaller roasters and coffeehouses to survive.

Jackson's Java Coffee House in Charlotte has been roasting and selling coffee for more than 16 years. Seven years ago, the company opened a second location uptown.

"There have been dozens of coffee shops in Charlotte that have opened and closed," said owner . "We're one of the few people who have been able to sort of last. With the prices and the costs, taxes — you name it — we're competing against corporate giants, and it's a little bit of 'Survivor.' "

The business, Jackson said, relies on customer loyalty.

"With us being a small sort of family — literally having customers that are still coming in from 16 years ago — we're real sensitive to raising prices, and they are, too," Jackson said.

Jackson said he was reluctant to pass rising costs to customers, but once the price of raw beans doubled, the coffee shop was forced to. A pound of beans from  now costs $11.95, and a pound from  was marked up to $39.95.

"People actually say, 'I'm surprised you didn't raise prices earlier, honestly,' " Jackson said.

Jay Gestwicki, another Charlotte-area roaster, doesn't expect prices to fall any time soon.

"The biggest thing is just planning for (high prices) to stay for a while — kind of like $4 gasoline," he said.

Prices may be higher, but both Gestwicki and King say sales have not dropped too much.

"People who like good coffee are going to have good coffee. People keep buying," King said.

Increase in Price of Coffee

          Coffee is a commodity which means that it is a raw material that is used to produce consumer products. This article talks about the clear and significant rise in price of coffee due to the increase in the demand for coffee and the increase of fuel prices. The increase of fuel prices would be a non-price determinant of supply because it is a cost of a factor of production because the production includes the transport of the coffee, but the increase in the demand would be the factor that would clearly raise the price of the coffee.

          As is seen from the graph above, an increase in demand from Q1 to Q2 will cause a shift in the demand curve and therefore a movement in the supply curve. This will move the equilibrium price from P1 to P2, increasing the price of coffee because at the initial price there will be an excess of demand.

           The article makes reference to the fact that sales have not dropped too much even though the price of coffee has increased, which suggests that coffee has an inelastic price elasticity of demand (PED). PED measures the responsiveness of quantity demanded to a change in price, ceteris paribus, considering all other factors being held constant. When PED is elastic, it means that a change in price would cause a significant change in the quantity demanded, but in this case, when the PED is inelastic, it means that a change in price would cause only a slight change in quantity demanded. This inelasticity could be due to the fact that the caffeine in coffee is necessary for many consumers, and therefore they need to continue buying it, and the lack of good substitutes, among other things.

          However, the inelasticity of coffee has the consequence that consumers need to cut down on their other expenses. This connects to the concept of opportunity cost. This is the cost of an alternative that must be forgone in order to pursue a certain choice. Many consumers aren’t willing to give up coffee, but they have to give up something because their income has not increased even though the price of coffee has, which means the consumers’ real income has decreased. So consumers of coffee now have to spend a higher percentage of their income on coffee in comparison to before, which means that they have to cut down on other goods or services. Sleezer switched her family from name brand coffee to store-brand coffee, which means that the quality of the name brand coffee is what she loses with the switch, making that her opportunity cost. Due to the fact that coffee does not take up that high of a percentage of consumers’ income, the opportunity cost will not need to be that big.

           Another thing that is seen in the article is that if small roasters and coffeehouses will not receive enough profit if they do not serve the demanded high quality coffee and must therefore close down. This would cause all the employees that used to work there to be unemployed, which is bad for them. Also, due to the rise in price for coffee, there are not many investors that would like to invest in coffee shops or cafés as it will cost too much .

          Overall, the price increase of coffee is bad for consumers because they now need to pay more for their coffee. On the other hand, the upward movement in the supply curve caused by the increase in demand for coffee would give more consumers the opportunity to buy coffee, so it would be good for consumers that were not able to buy coffee before.

          However, for producers of the coffee beans, the rise of price can be seen as beneficial. This is because their total revenue (price multiplied by quantity) increases because the increase in demand causes a higher quantity as well as a higher price, which in turn causes the producers to gain more revenue.

          This can clearly be seen on the graph above, where before the increase in demand, producer revenue is equal to the blue area, but after the increase in demand it is equal to the red area in addition to the blue area.

          Also, in the long run when all factors of production are adjustable, it is possible to employ more people into producing this increase in demand, so employment will increase in the production of coffee beans, which is good.