Unit 1: Changes in the market for Starbucks coffee

From the Guardian comes this article explaining how the factors that effect demand for, and supply of Starbucks coffee have changed

http://news.bbc.co.uk/1/hi/technology/7094069.stm

In the article it says

Starbucks has been hit by a combination of rising raw material costs, which has forced it to raise prices and a drop in consumer confidence as a result of the sub-prime mortgage crisis, which has made its expensive coffee a little less alluring. The company increased prices over the summer but pricing pressures are continuing - milk prices, for instance, have increased more than 60% since the start of the year.
Starbucks also faces increasing competition from fast food companies such as McDonald's who are moving into the hot beverages market as their core burgers 'n' fries offerings come under increasing attack from pressure groups who accuse them of being unhealthy.


a) Identify the demand factor(s) that have changed and state if the demand curve has shifted to the right or left
b) Identify the supply factor(s) that have changed and state if the supply curve has shifted to the right or left
c) Using a diagram and your answers to a and b, explain the fall in Starbucks sales
d) What has Starbucks done to win back their customers and increase demand?
e) Discuss the extent to which you believe their stratagy will be successful