Question

describe how does the law of demand, changes in demand, and law of supply influence starbucks coffee Corporation

Answer 1

1. The law of demand for every sustainaing economy and all the organisation states that the demand would increase as the price would fall and the demand would decrease as the price would rise. The same is the case we can study for the Starbucks as well. Let's suppose you went to buy a coffee at starbuck for about $2 per cup of coffee. You have a budgeted amount of $2.25 for everyday and it is your routine that you'll buy a $2 coffe from starbucks and go to your work. After few days, you get to know that Starbucks increase its price to $2.50 per cup. You having only $2.25 for everyday can't think of spending the same amount for coffee even if it only a 50 cent more because you don't even have that much amount to buy the same product and if you would, your whole budget would get disturbed. So, you'll either stop buying coffee from Starbucks or find another substitute to have your coffee. This is the law of demand. If the price would increase, the demand would surely fall. If the price would decrease, more customers would be attracted to buy more coffee because now that would fall in their income and budgeted line.

2. Changes in demand is again a very vivid factor to be discussed for the Starbucks organisation. As discussed above one of the factor which would change the demand for a person to have the Starbucks coffee would the level of income. If his level of income falls in the range to buy the product, he would have a demand otherwise not. Others factors or determinants which changes the demand for Starbucks coffee are: availability of substitutes, Seasonal Factor, Discounds and Offers, Tastes of the People and Class of the people. Taste and Class talks about the demand being inelastic as many people who have developed the taste of Starbucks would buy it anyhow even if the price increases or decreases because they have a habit and taste for the same product which doesn't affect their demand. On the other hand, factors like availability of discounts, more service, seasonal factors and substitutes affects the demand.

3. Law of supply talks about the contradictory factor of the law of demand which tells the side of the supplier. It states the as the prices increases, the supply would also increase and it's obvious as well. If the Starbucks organisation is seeing that increasing the price of the product by little is making them having huge profit, and still people are buying the product because of habits or other factors, then it simply would increase the production or supply as well. Thus, the supply increases as the price increases because simply, the profit increases.