Company: Starbucks Corp

STARBUCKS ELASTICITY OF DEMAND
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Company: Starbucks Corp. (NASDAQ: SBUX); industry: fast food industry
Starbucks Corp. (NASDAQ: SBUX) is an organization that specials in coffee drinks to its customers. The company has specialized in providing various blends from single origin coffee while providing other brands to brew at home. Starbucks has seen its income increasing to settle at 1.38 billion and the earning per share standing at1.79. The company’s sales growth has increased to stand at 13.70% and an income growth of 11.10%.
Demand: The demand for coffee beverages has been increasing due to its addiction effects. A change in the price of Starbucks coffee will have an effect in demand for coffee. This results to a shift of the demand curve and thus, Starbucks priced its coffee such that it remains competitive hence increasing its revenue.
Supply: There is an increase in supply of coffee outlets, and thus, Starbucks has embarked on venturing to new markets and innovation of new brands to attract more customers and offer satisfaction to its customers’ needs. This results in a shift of supply curve to the right.
Price Elasticity:
Industry Elasticity: The price of coffee on the industry level is inelastic in the short run because of substitutes for the products offered by Starbucks. An increase in the price of coffee may shift the needs of consumers to other beverages thereby decreasing the industry sales in the long run
Price Elasticity of Demand: the price of Starbucks coffee is elastic in the short run. This is because there are substitutes for the product in the industry, and an increase in t he coffee prices will result to consumers purchasing the products elsewhere, for cheaper prices and higher utility.
Cross Elasticity:
Substitutes: Cross elaciticity between Starbucks and firms like McDonalds and Dunkin’ Donuts is positive, and this makes them substitutes. The increase for demand of coffee and its availability has resulted in an increased competition within the fast-food industry. The rise of Starbucks price by MSN will result in an increase of their demand. Consequently, if MSN reduces their prices, the demand of Starbucks will decrease.
Compliments: compliment goods responds to a change in price of another good. A rise in price of a compliment good see a price rise in another good causing demand for both goods to decrease. A high positive cross elasticity implies that a rise in the price of one good result to a rise in demand for another good. The cost of coffee will go up if the price of milk increases because milk is a compliment of coffee (Schultz & Gordon, 2011).
Income elasticity: The demand curve is impacted by income elasticity...