Introduction to Microeconomics - Essay Example

Introduction to MICRO ECONOMICS In recent times, the Brazilian coffee market is suffering form a microeconomic problem. There has been some serious shortage in supply of coffee in the coffee market of Brazil. As a result of this supply side shock in the coffee market, the price of coffee has increased significantly. It has reached its peak on 7th February, 2011. As a result of this increased coffee price, trade on Brazilian coffee has become limited presently as people are facing problems to adjust with a sudden rise in prices.

Certain factors are responsible for this shortage in coffee supply. One of the vital factors that have caused such a situation to happen is the lower level of harvest in Mexico. Mexico has been one of the major exporters of coffee beans to Brazil. Thus, fall in the amount of harvest of coffee in Mexico resulted in a shortage of supply of coffee for the domestic consumption in Brazil. Another important factor behind the shortage of coffee supply was the sudden call out for a strike by the truck drivers of Columbia.

This strike lasted for about two weeks thus affecting the supply, in consequence, the export of coffee to a large extent. Increased amount of exports of coffee beans abroad is another factor behind the shortage of domestic supply. There have been huge sales of coffee at abroad in this month of February; while on the other hand, the level of demand of coffee domestically is expected to increase further, and thus, will aggravate the problem of rising prices further. As the economy experiences a boom in the market, Brazil has toped to break all records as the export of coffee amounts to 2.

7 millions of bags, equivalent to which, the consumption level of coffee rates to more than one millions of bags. The consumption of green and soluble coffee in Brazil is set to reach a limit of 6% in comparison to a record of 20.27 millions bags weighing sixty kilograms each. All these factors has led prices to shoot up as a result of which trading paced down as buyers were not been so comfortable with the higher prices. The strike of the truck drives went out unresolved and this uncertainty has caused a persistent shortage in supply thus creating an obstruction in delivery of coffee.

It is always said that in trade one must be prepared to face all kinds of situations and the consequences related with it. One must be so optimistic, that even if the economy undergoes a financial crisis, one must look forward to a possibility of higher markets still. Due to low amount of harvest, coffee export from Brazil has lowered down to 26% during the first four months of the season but then the Mexican government declared the harvest will be productive enough to export 3.5 million bags of coffee in near future that will increase coffee supply to the domestic coffee market of Brazil.

Besides this, the Brazilian government is also taking steps to resolve the truck drivers’ problems. Due to all these efforts, supply can be expected to match demand very soon that will in turn reduce price. Source: Hieronymus, Bill. “Brazil's Coffee Trades Limited On Soaring Prices”. The Wall Street Journal. !7th Feb: 2011. Online. URL of the article: http://online.wsj.com/article/BT-CO-20110217-717470.html