Understanding the Factors that Shape the Price and Demand for Coffee: A Social Science Perspective

In the coffee market, which of the following changes will increase the price and decrease the quantity of coffee?

Supply- Decrease Demand- No change

There are several changes in the coffee market that could potentially increase the price of coffee and decrease the quantity demanded. Here are some scenarios that could lead to such changes:

1. Drought or natural disaster: If a drought or natural disaster like a storm or frost occurs, it may damage the coffee crops and lead to a decrease in the supply of coffee. This decrease in supply coupled with constant demand levels can lead to an increase in the price of the coffee due to the reduced availability.

2. Increase in production costs: If the cost of production of coffee increases due to an increase in the cost of labor or raw materials like fertilizer or pesticides, the producers will be forced to increase the price of coffee to maintain profitability. This increase in price can then lead to a decrease in quantity demanded by the consumers, as some people may be unable or unwilling to pay the higher price.

3. Increase in demand: If there is a sudden surge in demand for coffee, and the supply cannot keep up with the demand, the price of coffee is likely to increase due to the scarcity of the product. With high demand, producers could still decide to produce less even if they don’t spend more, as this can help them maintain the high price.

4. Price of substitutes: If the price of close substitutes like tea or energy drinks decreases, consumers may opt for the substitute instead of coffee, leading to a decrease in the quantity demanded and correspondingly, a reduction in the price of coffee.

Overall, any factor that reduces the supply of coffee or increases the cost of production is likely to result in an increase in the price of coffee and a decrease in the quantity demanded.

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