Question

According to the Front Page article, FRONT PAGE Starbucks Raises Prices Again Starbucks has made the morning caffeine jolt a bit more expensive. The company increased the price of brewed coffee from $1.95 to $2.15 for a tall (small) cup, effective June 2018. The response of consumers has been muted, with traffic at Starbucks declining 2 percent in the six months following the price increase. Despite the drop in traffic, sales revenue climbed 1 percent. Source: Media reports, June-December 2018 Instructions: Round your responses one decimal place.

Answer 1

Coffee prices fluctuate due to international market forces, affecting both businesses and consumers. Starbucks's price increase is an example, as is the volatile price of coffee per pound on the world market, which can significantly impact producer income.

Step-by-step explanation:

Coffee prices are subject to fluctuation due to various factors such as international trade, demand, weather conditions, and economic policies. For instance, when Starbucks raised their prices for a tall cup of brewed coffee from $1.95 to $2.15, consumer traffic declined, although sales revenue slightly increased. Similarly, the pricing structure for products and services like those of coffee shops or Netflix can change, impacting how much consumers pay — as with Netflix's 60% price hike in 2011. Coffee's price volatility is also evident in its international market value, with significant shifts over the years due to supply and demand fluctuations.

The importance of pricing strategy in business cannot be understated, as it can directly affect sales, consumer behavior, and overall revenue. For the many families dependent on the coffee trade, these fluctuations can significantly impact their income and economic stability.