Demand can be defined as the quantity of a product or service that is desired by buyers. Thus, the quantity demanded represents the amount of the product that people are willing and able to buy at a certain price. Demand relationship is the name given to the relationship between the price and quantity demanded. Supply can be described as how much the market can offer. The supplied quantity is the amount of acertain good that producers are willing to supply in exchange for a given price. The supply relationship is the correlation existing between price and the quantity of a good or service supplied to a market.
Coffee
Coffee is an example of a brewed drink that is prepared from roasted seeds, known as coffee beans, which are obtained from the coffee plant. Coffee has a caffeine content, which has a stimulating effect on humans, making it the most popular drink worldwide, behind water and tea.
Often, coffee is intercropped with food crops, e.g. beans, rice or corn in the first several years of cultivation. Two main main species of coffee are grown, robusta coffee and Arabica coffee, which is regarded more highly, because robusta has less flavor and tends to be bitter.
Market trends affecting coffee.
Price of related goods
Demand of a good in the market can be affected by the price of related goods, depending on whether the goods are considered by the buyer to be substitutes or complimentary goods.
Substitution effect.
The substitution effect can be explained as the bargain opportunity of the consumer if the price of a good is lower than that of the substitute, if the good remains at full price. Due to this effect, consumers temporarily switch to their patterns of consumption by possibly substituting bargain items for items at full price. In the case of coffee, its consumer may choose to switch to tea, if he/she feels that it is more pocket friendly or is a better beverage.
Complementary goods.
When goods� consumption is tied to each other, they are said to be complementary. In this case, sugar and coffee are complementary goods, since coffee cannot be consumed without sugar. Fluctuations of price of sugar may affect the consumption of coffee, in that a higher sugar price may cause people to take less coffee, with a low sugar price causing a higher coffee intake.
Quantity demanded
The demand of consumers will change if any of the nonprice determinants change. This can be depicted as a shift of the demand curve to the left or to the right in a graph. The shifts in the coffee demanded must be distinguished from a movement along the demand curve which is caused by changes in its price: the only effect of these changes is in price which causes the quantity of coffee demanded to change, although the entire demand schedule remains the same.
New products available in the market can also change the taste of consumers, e.g. an arrival of another beverage could affect the demand of coffee.
Quantity supplied
The entire supply schedule will change and shift the supply curve if any one of the nonprice determinants changes. The shift of the supply curve needs to be distinguished from
movement along the supply curve, when price is altered. This does not change the supply but the quantity supplied.
Equilibrium
The price where supply and demand intersect is called the equilibrium. When the coffee price is above the equilibrium, more quantity is supplied than that demanded which this results into a surplus (Wintgens 825). At this condition there is usually no transaction between the seller and the buyer. Likewise, any price below the demanded quantity leads to anexcess of the supplied quantity. This condition results into a coffee shortage.At the intersection is where the amount of coffee demanded equals the amount supplied, which is also the state at which the price and the quantity equilibrium is stable.
Shortage.
A coffee shortage means that the demanded quantity exceeds the supplied quantity. A shortage exists when its price is below that in the equilibrium. The shortage will disappear and there will be a priceincrease if the market is free, and continue (shortage) anytime the market is not free. An example is if the government institutes a price ceiling on coffee. It is not relevant and has no bearing on the market if it is above the equilibrium.
Surplus.
A surplus means that the amount (quantity) of coffee supplied is more than the demanded amount. This can only exist above the equilibrium. The surplus will have a tendency of disappearing if the market is free, as the price is lowered. Only when the market is free will the surpluses continue.
Conclusion.
Coffee may technically not be regarded as a commodity since it is a fresh produce whose value is affected directly the length of time held, but it is bought and sold by roasters, price speculators and investors as a commodity that is tradable. It is also a favorite among so many of its diehard consumers world over. For this reason, everything that needs to be done has to be done in order ensuring the market forces affecting it are put into check.
