Tata Coffee, Starbucks Near Deal for Stores Essay

Tata Coffee, Starbucks Near Deal for Stores - Essay Example This is the fundamental concept of Supply and Demand Paradox (Fisher, 2007, p. 8). Today’s market is largely influenced by technology advances, globalization and rigorous competition between suppliers and therefore companies are seeking for an effective strategy that can help it stay competitive. Discovering new market and newer opportunity will be far effective way than identifying the existing demands and satisfying consumer wants accordingly. This piece of research paper reviews the literatures regarding factors affecting demand and supply and explain what is price as well as income elasticity in relation to the recent attempt of Starbuck to come in alliance with Tata Coffee. This paper also explains how discovering new market would be a better economic strategy to foster demands from the example of Starbucks’s attempt to deal with Tata Coffee. Economic perspectives of Demand and Supply Demand and supply are perhaps the names of the most important models in all of ec onomics and these two are normally used for providing insights on the movements in price and output. The basic underlying concept of economics assumes that there is a market, where sellers and buyers contact for trade. Sellers are expected to bring goods or services to the market wherefrom consumers are assumed to bring money to it to buy the goods or services they demand (Guell, 2008, p. 20). From the economic point of view, demand is a schedule or curve or any other graphical presentation of the various amounts of a product that consumers are willing and able to purchase at each of the series of possible prices during a specific period of time (McConnell and Brue, 2004, p. 40). Demand is the quantity of a product or service that will be purchased at different possible prices when other things stay unchanged. Quantity demanded shows how much consumers are willing and able to buy the goods or services at a particular price during a specific period of time (Guell, 2008, p. 22). Accor ding to the law of demand, price and quantity demanded are inversely related and therefore an individual’s demand schedule will be downwardly sloping in its curve, as depicted in the graph. As price falls, the quantity demanded rises and as price rises, quantity demanded falls. When other market variables are remaining constant, consumers will be tended to buy more of a product as its price declines. Quantity supplied is the maximum quantity that sellers want to sell at a given price. The law of supply states that the quantity supplied will increase when the price rises and will decrease when the price falls, because a supplier will be able to produce and supply more when he expects to gain more profits or other advantages due to price hike (Wessels, 2006, p. 37). As shown in the figure, producers will be producing more of the product or services when price of the same increases in the market. Most of the Economics literatures (Wessels, 2006, McEachern, 2011, Lipsey and Chrys tal, 2007 etc) explained that producers are tended to supply more when they expect an extra earning from the price hike or from any other factors that may lead to the same. When it comes to the case of Starbuck’s attempt to work in alliance with Tata Coffee in India, as Ahmed (Oct, 2011) wrote in Wall