Economic100 Article Analysis Example | Topics and Well Written Essays - 1250 words - 1

Economic100 Analysis - Article ExampleThe article sheds light on the increasing costs of business, implying that not only the apparent(a) rise in coffee beans but also utilities, rent etc attribute to the hike in the prices. Keeping this in mind, the climate of business is not a favorable one, and this may have short term to middle term implications for different segments in the market as well. The objective of this analysis is to apply applicable economic concepts to this article and understand the fundamentals at work here. Economic Concepts There are a few key economic concepts which can be applied to explain the whole of things. Some of them include strike pull inflation, increase in aggregate take away, porters five forces etc. particular(a) focus will be laid on the implications of the existing context, given it persists and how it will hamper longer terms sales etc. Analysis The early economic concept which the article lays emphasis on is the fact that there has been an overall increase in the demand for coffee around the world. Weve seen that over the soma of the last 3 decades, a lot of globalization has taken place, and in the process, there has been a lot of transference of good and services across borders. hot chocolate is one of those items which has found a market for itself wherever it has gone. Growing economies such as China and India have shown great promise in terms of demand for the results and this has only fueled the prices in an upward direction. When aggregate demand increases, it has to be followed by an increase in the aggregate supply in an equal magnitude otherwise the result is inflationary pressures in the providence. In the case of coffee, the demand has increased, but the supply has not been able to cope with the demand. Hence the result is demand pull inflation. As is seen in the diagram, increases in the aggregate demand will cause a movement along the curve, but if there are other variables altering, then this can trigger a shift of the curve all together. The inflation we refer to over here doesnt imply that the whole economy is heating up, but rather just the coffee segment. However, inflation is something that cannot be sustained in this segment. The reason can be explained by Porters Five Force model. One of the key pillars of that model is the threat of a substitute. In the case of coffee, there are many substitutes readily available in the market. They can include tea, lattes, cappuccinos etc. The point is that price fluctuations are not sustainable in an industry such as this one. Moreover, the price sensitivity of this product is extremely high. Therefore, even the slightest fluctuations in price could trigger a decrease in supply for this product. Now the real debate starts here. The problem in prices arose delinquent to an uncoordinated demand. However, whats the trade-off between increasing prices and increasing consumer base? The answer to this question lies in the fact that no p roduction line would same to see a decline in the demand for that particular good, however, it must be able to sustain the demand without increasing prices. If prices are pulled up collectible to these pressures, it implies that the demand cannot be sustained and eventually, the higher prices will lead to a decline in the demand and equilibrium will once again be attained on the previous level. When that happens, this cycle will repeat