Rohit’s Article

Market: Starbucks Drinks

Source: https://atlantic.ctvnews.ca/your-starbucks-caffeine-jolt-comes-with-a-spike-in-prices-1.4841348

Recently, Starbucks raised prices on about 30% of their products. The price increased due to a reduction in supply. Starbucks claimed that some of the reasons for these price increases were because of increased operating and occupancy expenses which include rent, marketing costs, equipment costs and materials costs. All of these costs can be classified as “costs of factors of production”, a supply determinant. Since the costs of factors of production increased, the supply decreased and the supply curve shifted to the left. At this new equilibrium point, there should be a decrease in quantity supplied and an increase in price, which explains the 30% price increase.  However, when referring to the graph, please note that according to food policy expert Sylvain Charlebois, the actual trend is quite inelastic. Thus, this simplified supply and demand graph may not be quite as accurate as expected since the quantity demanded remains relatively the same regardless of price increases.