Demand and Supply of Tea

The constant ups and downs in the prices of tea have caused sales to be unstable. For instance, when tea prices are low there is a high demand which means high sales for the producers but when tea prices start rising due to the supply and demand factors the demand may decrease, resulting in low sales. Low sales means that the income of the tea producers would fall, which may lead to a net loss in the company's Profit and Loss Account, this can be avoided if expenses are kept at a minimal level. On the contrary, high sales would result in a net profit which could mean increase in salaries of tea workers. In addition, whether the company makes a loss or a profit this would impact on the country's Gross Domestic Product (GDP) because according the price of tea, this would determine how much is being produced to match the level of demand. The Gross Domestic Product is referred to as a basic measure of a country's entire supply performance.

A healthy market is one that is competitive; the tea market is quite competitive due to the oligopolistic structure. This means that there are small numbers of large firms that sell homogeneous products; this type of market invites collusion or cartel type activities. Every business sets out to make a profit sometimes no matter the consequences. If there is an increase in tea prices in the shops, this would mean more profits for them because the price that was paid was probably a lot lower. This would not necessarily mean a rise in the price for tea growers because there are other costs to shops have to consider for example, the cost of raw materials such as sugar and milk. The increase in the shop prices could have been increased because there was an increase in the other raw materials mentioned earlier. The increase the shop made does not affect the tea growers, so it does not mean that they will increase their prices too. As a result of this the workers in the tea industry are not likely to get