Why Coffee Inflation Is Different

Coffee Inflation

Since February, the end date for the following graph, coffee prices slipped slightly. But still, they are way up. The reasons relate to the pandemic and the weather. Typical of Covid, we had shipping delays. Everywhere-from transport to energy and labor to packaging, there were supply chain disruptions. Then also, Brazil’s coffee growers were slammed by a drought and a frost:

Our Bottom Line: Inelastic Demand

Economists gauge our response to inflation with a look at our elasticity. Rather like a rubber band, when price changes, so too will the quantity we demand. If we have a massive response, then our price elasticity of demand is elastic while a small reaction is called inelastic. Doing the math, we create a fraction comparing the percent quantity (numerator) and percent price changes (denominator). As a result, a higher ratio signals we were more elastic.

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Econlife Team

Econlife Team

Located at the intersection of current events, history, and economics, econlife® slices away all of the layers that make economics boring and complex.