Final answer:
It is true that Starbucks sells coffee beans that are subject to price fluctuations due to the inelastic demand and variable supply conditions in the global market.
Step-by-step explanation:
True, Starbucks sells coffee beans which are sensitive to price fluctuations. The variability in coffee prices can be largely attributed to the inelasticity of coffee demand and the shifts in supply conditions. For instance, when supply is impacted negatively by events such as a major frost, as happened in Brazil in 1994, the limited supply combined with inelastic demand causes prices to soar. Conversely, when there is an influx in supply, such as when Vietnam became a significant coffee producer, prices can drop sharply due to the same inelastic demand. These dynamics show how sensitive the coffee market is to changes, potentially affecting Starbucks' pricing for its coffee beans.
The elasticity of coffee demand is estimated to be around 0.3. This means that a 10% increase in the price of coffee would only lead to a 3% decrease in the amount of coffee consumed. The laws of demand and supply dictate that a price change can lead to changes in production and consumption behavior, sometimes resulting in market disequilibrium. Also, the fact that coffee is an international crop means that global market conditions and the economic situations of exporting nations can cause dramatic fluctuations in price.