Demand for coffee beans in brazil is likely to decrease significantly because of middle classes in countries such as China Indonesia and also Brazil itself, are choosing robusta as their choice. Since the population in these countries are huge, the demand for robusta will significantly increase while demand for Arabica, which brazil mostly produced will decrease, and thus demand of coffee beans will significantly decrease. Also, due to recession, which affects the economy as a whole, consumers will try and save money and not purchase expensive goods such as Arabica coffee and choose cheaper substitutes such as robusta coffee instead. This thus significantly decrease the demand for coffee in brazil.

On the other hand, even though many Brazilian farmers invested to boost production of arabica in response to the high prices of 2011 and due to good weather, the supply increases, the increasing industrialization leaves rather limited space for them to boost the production of Arabica too. Thus, the supply of grain though increases quite a bit, it is unlikely to increase significantly much more.

 

Second factor that affect the market for coffee in brazil is price and availability of substitutes. As stated “There are two main varieties of coffee bean: arabica and robusta.” This means they are substitutes- goods that satisfy similar desire within the same price range. “the recession in Europe has hit demand and squeezed profits for roasters. These processors, including big food firms such as Nestlé and Kraft, have responded by blending cheaper robusta with arabica.”, shows that due to recession, consumers will have lower income and lower purchasing power, and thus the quantity demanded for more expensive substitutes, such as Arabica will decrease, and consumers will switch away from Arabica to relatively cheaper substitutes such as robusta. Since brazil mostly produced Arabica variety as stated above, the demand for coffee in brazil will decrease, ceteris paribus.

Combining the two demand factors, there will be a leftward shift in demand curve from D0 to D1, in figure 1 below, ceteris paribus.

Third factor that affect the market for coffee in brazil is the weather and climate. “good weather in Brazil means that this year's crop has turned out to be unexpectedly large.” This shows that the good weather has caused the supply of Arabica coffee beans to increases, ceteris paribus.  There will be a rightward shift in supply curve from S0 to S1, ceteris paribus.   

Welcome to Home-Based Learning 2016!

By now, you should have the list of the team members in your group. Each team will analyse 2 articles below to identify 3 evidence/information (2 Demand + 1 Supply or 2 Supply + 1 Demand factors)  to answer the following essay question:

a) With reference to the 2 news articles, explain the fall in prices of coffee beans in Brazil.

To discuss the answers with your group members, double click anywhere on the wall and a virtual "sticky note" will appear at the top. From, enter your name, then you can use the "sticky note" to "chat" with each other. 

For example, Miss Lee: I don't think that is a non-price factor that affects demand. Please remember to write your name before the statement :) 

Lastly, please identify these non-price determinants of demand & supply by quoting the relevant phrases from the article. 

For example, as stated in article 1, "the recession in Europe has hit demand". After quoting the evidence for the article please proceed to explain how this non-price factor affects demand or supply with economic rigour. 

I have provided some scaffolding statements to guide you in your essay development. Address each statement by writing the essay segment in the respective sticky note. Press the pencil button to write the respective essay segment.