Supply_and_Demand

Explain shifts Supply and demand is one of the most important concepts of economics (Investopedia, 2010). According to Hometown productions (2010), supply and demand is”an economic model mainly based on quantity, price, and utility. It works on a changing equilibrium wherein the quantity is always Q and any shifts in demand will only affect the price. Supply shifts because of price, whereas demand shifts because of quantity, but both price and quantity affect the overall outcome of supply and demand” (The Commodity of the Market, para. 5). The market of coffee is a commodity that we will use to provide an example of how supply and demand works. Many factors cause a variety of shifts in supply and demand for this commodity. One event that can happen to cause a shift in supply is global warming. Coffee beans need warm, equatorial weather to grow and with erratic forces of nature, e.g. too much rainfall, then extreme dry spells as a direct consequence of deforestation and pollution, can very often produce a severe impact of global warming on coffee plants and beans. And based on these ever-changing, sometimes extreme climate and temperature changes, many of the major tropical coffee crop regions of the world which include Central America, Brazil, Africa, and India are experiencing irretrievable losses (Natural News Network, 2010). Therefore, the affect of global warming will impact our supply which in turn will increase the price for this commodity. Market trend reports demonstrate that when prices in coffee increase, the demands in said product decrease and a substitute for coffee, like tea, increases in demand. It works the other way around as well. If tea increases in price, than demand decreases and demand in coffee increases. Another factor that will cause a shift in supply and demand for coffee is if the price for a complementary item that can be used with coffee, e.g. donuts, creamer, sugar, etc. decrease in price, most likely the demand for coffee increases. If any of those complementary items were to increase in price than coffee demands decrease. A possible way to reduce the price of coffee could be a reduction in the price of labor, an improvement in the production of coffee, good weather, and an increase in the number of coffee-producing firms. Any of those possibilities would impact the supply for coffee making it a less expensive commodity. REFERENCES  Hometown productions. (2010). Food for Change. Retrieved from http://www.foodforchangemovie.com/blog/archives/tag/supply-and-demand Investopedia ULC. (2010). Investopedia. Retrieved from http://www.investopedia.com/university/economics/economics3.asp  Natural News Network. (2010). Natural News. Retrieved from http://www.naturalnews.com/022591.html