Analyze whether the demand for coffee is elastic, inelastic orunitary elastic & why?
There is an awful lot of coffee in Brazil; it supplies a large share of the world market. In 1994, people first began to realize that a frost in Brazil would cause havoc with the 1995 harvest. The economist magazine at that time reported estimates that the 1995 crop would be less than that of 1994. It was obvious that coffee was going to be scarce in 1995. Anticipating this situation, speculators bought coffee in 1994, bidding up its price even before the supply fell. Following table shows the price rise of coffee during these years.
Years 1993 1994 1995
Price ($) 0.9 2.0 2.1
Export Quantity 113 102 85
Keeping in view the scenario (B), analyze whether the demand for coffee is elastic, inelastic or unitary elastic and why?
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