The Economics of Coffee

When so called experts or studies come out claiming either a benefit or harm may come from consuming or using a certain good, it is almost always received with skepticism on one hand and possible concern on the other. If a study showed that coffee contained some antioxidants, I believe that there may be a small increase in the demand for coffee and that price may fluctuate upward in response to an increase in demand from the occasional or maybe non-drinker. Researchers at the University of Scranton (PA.) conducted a study of antioxidants in 100 different food items, including vegetables, fruits, nuts, spices, oils, and common beverages. Their study was described at the 230th national meeting of the American Chemical Society in August, 2005. Coffee came out number one and easily outranked such popular antioxidant sources as tea, milk, chocolate and cranberries. “Coffee is the number one source of antioxidants in the U.S. diet,” says Joe Vinson, professor of chemistry at the University of Scranton (American Chemical Society). The majority of people who already drink coffee regularly would most likely not have their coffee consumption habits affected, but a few may increase their use. The demand curve would shift to the right as demand increases and will result in higher prices for the consumer. Overall I do not see much change in consumption for the current coffee drinker.

If a major coffee producing country or countries has their crops adversely affected by a drought, the coffee prices will move upward as the demand remains the same while the supply (quantity) is reduced significantly. This situation will cause the supply curve to shift to the left and increase the cost to the consumer.

The question of what happens to coffee when the price of donuts increases is an interesting one. At first glance it may seem obvious that the increase in donut cost would drive coffee consumption down and therefore provide a coffee surplus and bring the cost