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In: Economics

Brewed coffee is one of the most popular drinks in the world and a big market...

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 WITH GRAPHS

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Expert Solution

To answer the question, firstly, you need to know what does a fair trade mean: The idea behind the fair trade is that, the product will be expensive to buy, but will be more ethical as you are paying directly to the supermarket which inturn is benefial for the farmers because they are getting a fair price for their product.

Talking about the farming of coffee beans, it is rightly mentioned that it takes a lot out of frmers to grow this particular product as it includes various difficult processes. Consumers are more aware now than they were earlier. With a lot of digitalisation and different unions, people can find the raising issues in any type of industry.

Supply and demand model tells us about the relationship between the quantity of a good that producers wish to sell at a price and the quantity that consumers wish to buy. There needs to be a market equilibrium to equate supply and demand through a price mechanism. When the farmers sell their product directly to the coffee companies they do not get a fair price for it as the company officials round them up with the technical terms and lower the price for it than the price they should actually get. As this continues to happen, the consumers are getting aware of the "fair trade" term and wish to do something benefial to the farmers. So, the customers are turning their back from the company supplied coffee beans and buying the product directly from the supermarkets and coffee shops. this change in the supply on the quantity of coffee to the company and the supermarkets made farmers aware that if they sell coffee directly to the markets they would get a fair price for it. And the customers also find it ethical so they do not mind giving some extra money for a product.

Here the increased demand for supermarket coffee changed the ocncept of selling of coffee beans to the companies and a fair price for the product could be set. Consumer prefrences can be easily influenced by even a small issue raised aginst a product as explained above in this case. A supply curve reprsents the willingness of a producer to sell more of their product in market at higher prices. whereas the demand curve depicts the willingness of consumers to buy a product at lower prices.


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