Supply and demand: Markets, Prices and price setting - Case Study Example

Assuming this will have an effect on the taste and preferences of the consumer which is a factor that affects demand of a product. A negative change in the preference will reduce the quantity demanded of the commodity. There will be a reduction in supply and price as the producers try to win back the loss of customers who are losing appeal in the unfiltered coffee. If consumers buy less of unfiltered coffee the demand curve will shift to the left this reduces the quantity and price of unfiltered coffee.

Also the health issue of unfiltered coffee will reduce the number of coffee users as they will turn to using other available but better beverages which are free of cholesterol. This will have an impact on the quantity of unfiltered coffee imported into that country and since the amount of coffee being consumed is also reducing. This subsequently will force the retailers to reduce the price they charge for the unfiltered coffee for their products shall have lost a lot of market and demand. b.) When the coffee plants from major producing countries are affected by drought.

This is a change in the weather conditions which is a factor that affects the supply of a product. Harsh weather conditions will reduce the output of the coffee from these countries. There will be a reduction in the amount of coffee supplied to the market. The supply curve will shift to the left. . This will impact the general quantity of coffee supplied in that country in that it will be dismal and in that case the price will rise since the several users will be there but the supply is low (Karl). c.) The price of donut decreases.

Assuming that donuts are complimentary goods to coffee. Then when the price of a complimentary good decreases then the price of the other good decreases. In our case when the price of a donut decreases the amount of coffee demanded also decreases. This phenomenon will lead to a shift in the demand curve to the left. The shift will lead a reduction in the price and quantity of the good demanded. In other words, in case of those coffee drinkers who normally take coffee with donuts, and the price of donuts decreases, the consumption of coffee will go up hence the demand.

This will make the prices of coffee to shoot since many people will be willing to buy more coffee to take with the extra donuts they can now get since they are now sold to them at lower prices. d.) In order to protect growers and have better working conditions for workers , a price floor has to be implemented. A price floor establishes a minimum price that can be charged for a product. It is always set above the market equilibrium. Price floor will lead to an increase in supply in the market that is not commensurate to the amount of demand.

This will lead to a surplus in the market. Buyers will be more selective since there is a wide range of commodities in the market. Due to the high amount of goods produced there will be wastage due to the coffee glut in the market. The government can also buy up all the excess coffee and store it then release it into the market at a later