In the News

Will small scale coffee growers survive the crisis?

Graham Watson

4th May 2020

Proof here that whilst we often simplify, and assume that primary products are homogenous, this isn't actually the case.

In this instance - in the coffee market - this is significant. Whilst the demand for low grade coffees, used to make instant coffee, has remained high, this isn't the case for small scale producers of high quality coffees, who are more likely to sell to independent cafes, or small roasters. As a result, the livelihoods of some of the latter group are under threat, with adverse implications for their standard of living.

It is a classic application of income elasticity of demand - with the demand for inferior goods increasing as incomes fall, and the demand for luxury goods collapsing by more than the fall in incomes, and a salutary tale about the risks associated with primary product specialisation.

Graham Watson

Graham Watson has taught Economics for over twenty years. He contributes to Tutor2U, reads voraciously and is interested in all aspects of Teaching and Learning.

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