Coffee Bean Market - Arabica by XueTing Lee

News Article 1

lee_xueting — 2016-04-04 05:48:50 UTC

News Article

lee_xueting — 2016-04-04 05:51:11 UTC

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

lee_xueting — 2016-04-04 05:52:46 UTC

Group name:

lee_xueting — 2016-04-04 06:03:43 UTC

Please write out the names of the members in the group.
1. Jane (Leader)
2. Natalia
3. Tiffanie
4. Fabian
5. Zane

Topic: Demand, Supply & Market Equilibrium

lee_xueting — 2016-04-04 06:04:45 UTC

Objective - Students will be able to identify and explain how the demand and supply factors affect the market for coffee beans.

Welcome:)

lee_xueting — 2016-04-04 06:06:48 UTC

Dear Students,

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.

Introduction

lee_xueting — 2016-04-04 06:30:11 UTC

Explain market mechanism:
Market mechanism works through the interaction of the market forces of demand and supply to determine the equilibrium price and output.

Define demand:
Amount of coffee beans that a consumer is willing and able to purchase in a given time at various prices

Define supply:
Amount of coffee beans that a producer is willing and able to offer for sale in a given period and at various prices

Body: State the initial equilibrium

lee_xueting — 2016-04-04 06:31:44 UTC

Jane: The initial equilibrium would be the intersection of So curve and Do curve

Body: Identify and explain whether the factor/event shifts the demand or supply curve. (2 Demand + 1 Supply or 2 Supply + 1 Demand)

lee_xueting — 2016-04-04 06:32:26 UTC

Tiffanie(edited by Jane. Natalia and Zane):- availability of substitutes(demand factor) -- ".
Quoted evidence: "These drinkers are filling their pots with cheaper robusta beans—what Kona Haque of Macquarie dubs the “emerging-market coffee”,"There are two main varieties of coffee bean: arabica and robusta. The former, which accounts for around 60% of the world's crop, is considered superior and fetches higher prices". Robusta and Arabica being substitutes. With the emergence of these cheaper coffee beans, consumers might switch to this type of coffee instead of the more expensive Brazilian coffee beans. Demand for Brazilian coffee beans will fall and the this causes the demand curve to shift to the left.
- recession (demand factor) -- "the recession in Europe has hit demand and squeezed profits for roasters." due to the recession, the purchasing power of companies/consumers will decrease and thus, consumers would not be able to afford the luxury good which is the arabica coffee and would thus have to settle for the cheaper altrernative which is the robusta coffee thus, this increases the demand for robusta coffee and in turn decreases the demand for arabica coffee.
- cost of production (supply factor)-- "Coffee is a labour-intensive crop; picking is still largely done by hand. Wages in Brazil and Colombia are rising fast and production costs are above prices". The increase in cost of production will cause a fall in supply which occurs at each and every price. this is due to the increment in marginal cost of production that will result in a leftward shift of the curve, c.p.

Body: Decide the direction and magnitude in which the curves shift

lee_xueting — 2016-04-04 06:34:27 UTC

TIffanie: both demand and supply curve will shift to the left.

Body: Using the market adjustment process, explain how the shift(s) changes the equilibrium price and quantity (Explanation of diagram):

lee_xueting — 2016-04-04 06:35:51 UTC

Note: Please draw the diagram manually, take a photo and upload it by clicking the "video icon".
Zane:

Due to a cheaper substitute such as the robusto coffee being available, the demand for the more luxurious arabica coffee decreases. As qty dd < qty ss , there is excess supply (surplus)
Hence, there will be a downward pressure on prices of coffee beans suppliers will have to reduce prices of arabica coffee to attract buyers
as prices of arabica coffee fall towards the market clearing price at E (from P2 to P1),
qty dd increases while qty ss decreases and this results in the gradual reduction of the surplus. Hence, there is a downwards pressure on price of arabica coffee (from P2 to P1) and the market adjustment process continues until qty dd = qty ss at the point E. Hence, the surplus is eliminated which results in the market finally clearing and a new market equilibrium E2 is achieved.

Body: State the new (final) equilibrium

lee_xueting — 2016-04-04 06:38:13 UTC

(FABIAN)
At new equilibrium price Pe, the new quantity demanded equals the new quantity supplied. Thus, the market is cleared.

Conclusion

lee_xueting — 2016-04-04 06:38:57 UTC

(NATALIA) In conclusion, the decrease in both demand and supply of the coffee beans will shift both graphs to the left, with the market adjustment process, there will be a downward pressure on the price of the coffee beans Hence the price of the coffee beans is seen to decrease, c.p.

Chat Box

lee_xueting — 2016-04-04 06:39:46 UTC

Ms Lee: Hi