Economics for Starbucks

Economics

Economics can be stated as the study of what constitutes rational human behavior in the endeavor to fulfill needs and wants. Companies around the world study economics behaviors as a forecast to prevent and calculate possible ups and downs during the fiscal year and how those behaviors will influence or not the yearly profit.

As a coffee chain, Starbucks, the CEO and shareholders have the annual meeting to discuss about how the economics and customers behaviors will change during the year. Having a forecast of previous years they are able to study and make assumptions about individual’s needs.

The most important product for Starbucks is the coffee. Starbucks imports coffee especially from South America. Many resources are responsible and will affect the coffee price. Farmers can have a bad year on the coffee crops and that will influence the final price of the coffee that Starbucks sells to customers.

Studying the elasticity curve, demand and supply, Starbucks may consider their customer’s necessities as sensitive or insensitive to price changes. Having the price of the coffee increasing, the final price of the coffee that consumers buy at the retail will increase and with that the daily consuming of coffee will decrease or they can change for competitors.

There are many coffee shops in America offering different ways to make the same product: coffee. To remain the first one at the market, Starbucks will bring to the stores new products as the new coffee combo for $3, 95. They also will invest in the international market expanding the business in places where consumers will be able to pay more for a coffee.

To determine the elasticity of the supply or demand curves, Starbucks’ economists will use the equation:

Elasticity = (% Change in quantity / % Change in price)

If the elasticity