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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.

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Introduction

IB Economics- Internal Assessment Cover Sheet Source of article: http://www.csmonitor.com/Business/Latest-News-Wires/2011/0623/Coffee-prices-nearly-double-with-no-relief-in-sight (accessed 09/02-2012) Title of article: Coffee prices nearly double, with no relief in sight Date of article: 23/06-2011 Date written: 10/02-2012 (edited 10/06-2012) Word count: 749 Commentary Number: 1 Area of syllabus: Microeconomics Coffee prices nearly double, with no relief in sight Coffee prices are up because of rising demand, higher fuel costs. High coffee prices has roasters, retailers struggling to cover costs. By Courtney Ridenhour, McClatchy Newspapers / June 23, 2011 CHARLOTTE, N.C. ? Coffee prices ? from generic to specialty brews ? have been ticking upward for over a year with no end in sight. The price of a pound of raw coffee beans has almost doubled in 12 months. Now consumers are cutting back, roasters are struggling and retailers are scrambling to cover costs. With rising food and fuel prices, coffee drinkers are left to make tough choices about their caffeine habits. Christina Sleezer of Fort Mill, S.C., isn't willing to give up coffee, but something had to give, because "I've got to get gas in my car." So Sleezer, who works in health care, switched her family of five to generic, store-brand coffee as the price of name brands rose. She said she refuses to pay $13 for a large can of Folger's or Maxwell House coffee when it used to cost only $8 or $9. ...read more.

Middle

"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. ...read more.

Conclusion

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. ...read more.

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