Abstract:
In 2004, the governments of coffee producing countries were considering how to respond to the dramatic decline in coffee prices caused in part by a large increase in coffee production in Brazil and Vietnam. Coffee was the main source of income for roughly 25 million farmers, mostly small land holders, in Latin America, Africa, and Asia. Coffee prices had hit 40-year lows in 2001 and had remained low since, resulting in real hardship for many farmers. A variety of alternative solutions had been suggested. The International Coffee Organization was advocating increasing demand through programs promoting coffee consumption, the Inter-American Development Bank supported promotion but also thought some high-cost countries should get out of coffee, while the non-governmental organization Oxfam was pushing fair trade pricing.
Learning Objective:
This case is designed for use in introductory courses in microeconomics to develop the ideas of supply and demand and the dilemmas in trying to influence market prices.
