Coffee Bean Market - Arabica by XueTing Lee

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. The demand and supply curve when drawn together in a diagram together with axis price over quantity demanded enables us to find the equilibrium as it is the intersection point of the demand and supply graph.

Define Demand:
Demand is defined as the amount of a good that consumers are able and willing to purchase in a given period of time at various prices.

Define Supply:
Supply is defined as the amount of a good that producers are able and willing to offer for sale in a given period of time at various prices.

Chat Box

lee_xueting — 2016-04-04 06:39:46 UTC

Ms Lee: Hi

Mr Wong: Hi all
Start filling in the different segments

Group name:

lee_xueting — 2016-04-04 06:03:43 UTC

Please write out the names of the members in the group.
1. Goh Kyi Yoong
2. Celine
3. Adriel
4. Wan Hui
5. Raj

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

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.

Body: State the initial equilibrium

lee_xueting — 2016-04-04 06:31:44 UTC

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

Supply curve shifts to the left as the profits earned from planting coffee is reduced due to the fact that the wages given to the workers are increasing and coffee prices are decreasing as show in the article "Wages in Brazil and Colombia are rising fast and production costs are above prices." The process of harvesting coffee is also mostly done by hand thus this will cause the curve to shift to the left.

Supply curve shifts further to the left as the incentive to supply has decreased, as shown in the article "The reason is that production of coffee, and of cheaper robusta beans in particular, is booming.". Since the production of coffee beans has increased and there is an oversupply,this causes farmers to produce less in the future, supply decreases and the supply curve therefore shifts to the left.

Demand curve shifts to the right as the expectation of the future price is expected to drop as the there is no subsidies given by the government and thus the prices will drop even more and the demand will increase causing the shift to be right

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

lee_xueting — 2016-04-04 06:34:27 UTC

Supply curve shifts to the left.
Demand curve shifts to the left.
Supply curve shifts more than demand curve.

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".

MAP: (Diagram Below) The original Demand and Supply curves are D1 and S1 respectively. Original Equilibrium is at E1 and original Price and Quantity are P1 and Q1 respectively.
There is a rightwards shift of Demand curve from D1 to D2 and a leftwards shift of Supply curve from S1 to S2

At Original Price (P1), quantity demanded (Qd) is more than quantity supplied (Qs). A shortage occurs, causing an upwards pressure in price.
As price increases, the quantity demanded rises and quantity supplied falls until a new equilibrium is reached at E2

Body: State the new (final) equilibrium

lee_xueting — 2016-04-04 06:38:13 UTC

Conclusion

lee_xueting — 2016-04-04 06:38:57 UTC

The concurrent fall in supply and increase in demand would reinforce each other to cause a sharper rise in equilibrium price. However the effect on equilibrium quantity is indeterminate as it depends on the relative extent of changes in demand and supply. If the increase in demand is greater than the fall in supply, equilibrium quantity will rise. On the other hand, if the increase in demand is smaller than the fall in supply, equilibrium quantity will fall.
(Therefore in this case, DD increase < SS decrease ; thus equilibrium quantity decreases.)