Question

6. Indicate the direction of Demand and/or Supply (not quantities or prices): whether they increase or decrease, in the following situations for Starbucks Coffee (conventional brand), and explain why. (worth 7 points) a. McDonald’s introduces McCafe: Answer: b. Training baristas is becoming more expensive: Answer: c. The company can sell flavored teas, which have a rising price: Answer: d. Prices in this industry are expected to drop in the future: Answer: e. Local Median income rises: Answer: f. New quality pastries are added to the menu: Answer: g. A coffee tax is added to the producer: Answer:

Answer 1

a> Demand curve shifts left as there is other alternative now and the conumer has more options which will decrease the demand for starbucks coffee.

b> Supply Curve will shift to the left as there is an increase in the cost of production and thus, there will be less supply at same price.

c> Demand curve will shift left because the consumers are given a substitute which is tea over here, thus the coffee will have lesser demand now.

d> The supply curve will shift to the right as there is less cost of production and thus, there will be more supply of coffee at the same price.