Market demand for coffee in Houston and Cleveland
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To continue with your evaluation for the new vice president position, the president of your company, Mr. Riley, has asked you to prepare a report for him determining the economic impact of a coffee push cart that will provide hot coffee and cappuccinos to the public. He explains to you that the cart will operate on sidewalks near the center of town from 6 a.m. to 6 p.m., and it will operate year-round. He also explains that the firm that has come up with the idea decided to start the coffee push cart in either Cleveland, Ohio or Houston, Texas.
You must submit a report for Mr Riley in which you address the above situation and report on the following questions below.
Just need help answering these three questions thanks
â?¢ Compare the supply and demand conditions in both locations. How many people live in each place? What is the weather like? What are the industries? How elastic will the price of hot coffee be in both locations? Be sure to consider the impact of climate.
â?¢ How will consumers behave to maximize their utility? What is the average income in each location?
â?¢ What are the costs of production both in the short run and long run for operating the push cart?
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Solution Summary
Determining market demand for coffee in Houston and Cleveland
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The population of Cleveland has declined in recently years, and now only numbers about 500,000. Houston on the other hand continues to grow, and currently its population is about 2.2 million. Houston is hot and muggy in the summer, while Cleveland is cold in the winter. Hot coffee would be much more desirable when temperatures fall. However, a larger population would increase demand. The elasticity of demand will be much higher in Cleveland during the winter. This means that people will be less likely to be deterred by a higher price. In Houston, an increase in price would likely lead to a large decline in demand.
Consumers maximize utility ...
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