Microeconomics
The class Principles Microeconomics. text book Principles Microeconomics N. Gregory Mankiw. paper answer questions. Final Project Following a description final project ECO-112. The project parts, answered complete project.
Principles of microeconomics: Products used in daily life
Product 1: A Starbucks latte
Product description and usage
The Starbucks latte is a coffee beverage made with espresso and steamed milk. On the company website it is described as "the original coffeehouse classic. And like most classics, part of its appeal comes from its simplicity. A caffe latte is simply a shot or two of bold, tasty espresso with fresh, sweet steamed milk over it. Some prefer to add syrup or extra espresso to the recipe. Some maintain that it is entirely perfect as is" (Caffe latte, 2012, Starbucks). Starbucks lattes can be consumed 'to go' or drank in Starbucks stores, which often have the advantage for students and commuters of having free Wi-Fi. Although it may not satisfy the desires of coffee purists, the latte is supposed to be modeled upon Italian coffee beverages and is less caloric and milkshake-like than Starbucks' other beverages, such as its Frappucinos.
Factors that determine the demand for the products
Starbucks has often been described as an 'affordable luxury' product. It is not a 'necessary' product in the sense that a penny-pinching consumer can find cheaper coffee, make coffee at home, or do without coffee altogether. However, consumers may use coffee beverages as a way of 'treating' themselves after a hard day. Also, as workers are staying awake longer and longer hours, demand for caffeinated beverages has increased -- but so has the availability of substitutes like energy drinks. The economy, the availability of substitutes, and consumer trends in terms of tastes and buying habits all affect demand for Starbucks' products.
Factors that determine the supply of the products
Coffee beans are imported by Starbucks from around the world. Although not an exclusively Fair Trade-certified company, Starbucks does have Fair Trade lines of coffee. The price of coffee, the price of milk, and the price of fuel in terms of transportation all affect the price of Starbucks products. And an additional component is the price of labor, given that hourly wages of employees must be factored into the price of the coffee.
Available substitutes for the product
Many substitute goods exist for Starbucks lattes, spanning from coffee at home, coffee from other coffee houses, soda, energy drinks, tea, or iced tea...virtually any beverage that acts as a caffeinated stimulus for the drinker.
Available complements for the product
Complementary goods include the food at Starbucks, which includes pastries and sandwiches.
Is demand for the product elastic or inelastic in the short run? In the long run?
In the short and long-run, demand for this product is highly elastic. Cutting out an afternoon latte is an easy way to scale down the daily costs of living. Even someone who is highly addicted to caffeine can make do with other, lower-cost substitutes. Over the long run, someone might discover that he or she does not miss drinking Starbucks coffee very much and actually prefers drinking the coffee of another establishment, further reducing demand.
Is the firm's production capital-intensive or labor-intensive? How important is technology in producing the product? Why?
Technology is necessary for Starbucks. Although it is a 'chain' operation, Starbucks sells itself at least partially on the quality of its beverages, which it insists are superior to that of its competitors like McDonald's and Dunkin' Donuts. The coffee is produced by machines. However, overall it is a more labor-intensive operation. Once the machines are bought, there is no need to constantly update them, given the relatively limited nature of the menu, but there is a need to have a consistent source of well-trained staff to make the coffee.
In which of the four market structures does each firm operate? Describe the attributes of the firm's market that show why that is the relevant market structure.
Perfectly competitive. The wide range of substitutes and the maturity of the market demand mean that Starbucks must fight...
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