Question

Brewed coffee is one of the most popular drinks in the world and a big market in Singapore. In recent years Singaporean consumers have become concerned that coffee farmers often receive very low prices by large coffee companies buying their beans and selling them in international markets. For this reason, fair trade coffee has reached supermarket shelves and coffee shops. Because producing fair trade coffee includes providing extra income for the farmers, this product is more costly to make than other coffee types of comparable quality. Using the demand-supply model, analyse this change in consumer preferences. Examine the likely consequences in one or two markets of your choice.

Answer 1

Demand supply model in competitive coffee market

In the competitive market,the intersection of demand and supply curves determine the equilibrium quantity and equilibrium price of a product.

#BREWED COFFEE MARKET IN SINGAPORE AND IIMPACT OF CONSUMER PREFERENCES

The equilibrium price of brewed coffee is determined where demand and supply curves intersect ,but when the consumers become aware of loss of farmers in selling of brewed coffee,they reduce their demand for this product,due to this the market demand for brewed coffee decreases.

see the graph below-----

DEMAND - SUPPLY MODEL OF BREWED COFFEE MARKET

We find in the above graph that the demand curve of brewed coffee shifts leftward from S to S' and new equilibrium point emerges E' from E

As a result ,the new equilibrium quantity decreases from Q to Q' while new equilibrium price falls from P to P'.

# FAIR TRDE COFFEE MARKET AND IMPACT OF CONSUMERS PREFERENCE

When people find that fair trade coffee,though a bit costlier,yet provides some better deal to farmers,they prefer to buy this product as a substitute of brewed coffee,so the market demand for fair trade coffee increases .See the graph below------

DEMAND SUPPLY MODEL OF FAIR TRADE COFFEE

We find in above graph that the demand curve of fair trade coffee shifts rightward from Q to Q' and new equilibrium point also shifts from E to Each. Consequently, the new equilibrium quantity increases from Q to Q' and new equilibrium price also rises from P to Price

# LIKELY CONSEQUENCES IN GRAIN MARKET IN INDIA( PUNJAB)

In recent past, the grain market in Punjab confronted the same situation when people changed their preferences to avoid buying such grain quality which causing very low margin to farmers ,the consumers started preferring that grain which provided some good margin to farmers .