Economic100 Article Analysis Example | Topics and Well Written Essays - 1250 words - 1

Economic100 Analysis - Article ExampleThe article sheds light on the increase costs of business, implying that non only the apparent rise in java beans but too utilities, rent etc attribute to the hike in the impairments. Keeping this in mind, the climate of business is not a favorable one, and this may surrender short term to middle term implications for another(prenominal) segments in the mart as well. The objective of this analysis is to apply relevant economic concepts to this article and understand the fundamentals at work here. Economic Concepts There are a few key economic concepts which can be applied to explain the whole of things. Some of them include demand pull inflation, increase in marrow demand, porters five forces etc. Particular focus lead be laid on the implications of the existing context, given it persists and how it will hamper longer terms sales etc. Analysis The head start economic concept which the article lays emphasis on is the fact that in that re spect has been an overall increase in the demand for coffee around the world. Weve seen that over the course of the last 3 decades, a lot of globalization has taken place, and in the process, there has been a lot of transference of good and services across borders. burnt umber is one of those items which has found a market for itself wherever it has gone. Growing economies such as China and India have shown great promise in terms of demand for the yields and this has only fueled the prices in an upward direction. When join demand increases, it has to be followed by an increase in the merge supply in an equal magnitude otherwise the result is inflationary pressures in the economy. In the case of coffee, the demand has increased, but the supply has not been able to cope with the demand. Hence the result is demand pull inflation. As is seen in the diagram, increases in the aggregate demand will cause a movement along the curve, but if there are other variables altering, then this can trigger a shift of the curve all together. The inflation we refer to over here doesnt imply that the whole economy is heating up, but rather just the coffee segment. However, inflation is something that cannot be begined in this segment. The reason can be explained by Porters Five Force model. One of the key pillars of that model is the threat of a substitute. In the case of coffee, there are many substitutes readily available in the market. They can include tea, lattes, cappuccinos etc. The point is that price fluctuations are not sustainable in an industry such as this one. Moreover, the price sensitivity of this product is extremely high. Therefore, even the slightest fluctuations in price could trigger a decrease in supply for this product. instantly the real debate starts here. The problem in prices arose due to an uncoordinated demand. However, whats the trade-off between increasing prices and increasing consumer base? The answer to this question lies in the fact that n o production line would akin to see a decline in the demand for that particular good, however, it must be able to sustain the demand without increasing prices. If prices are pulled up due to these pressures, it implies that the demand cannot be sustained and eventually, the higher prices will lead to a decline in the demand and equilibrium will once again be attained on the previous level. When that happens, this cycle will repeat