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A coffee cup sells a small cup of coffee at $3 and a large cup which is twice as big at $5

User Gospodin
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Final answer:

The question addresses business economics, specifically pricing strategy, using the coffee industry and a Netflix pricing change as examples. It explores the complex nature of product pricing and the impact of market dynamics on price fluctuations that affect consumers and businesses alike.

Step-by-step explanation:

Understanding Coffee Pricing and Market Dynamics

The question presents a scenario where pricing for a coffee shop changes, drawing a comparison to a situation faced by Netflix customers. This reflects broader economic concepts like price structuring and market strategy. The example given outlines a change from a single price for a cup of coffee to a differentiated pricing model where the base product and add-ons are priced separately. This type of pricing strategy can be a reflection of underlying market forces or a company's approach to segmentation and revenue maximization.

In essence, the fluctuation of coffee prices on the global market can be attributed to various factors. These include weather patterns, political stability, global demand, and other economic factors that affect the supply chain. The international crop's pricing instability can have significant implications for the millions of families reliant on coffee production, as witnessed in the historical fluctuations illustrated from 1993 to 2012.

The Netflix scenario mentioned relates to a situation where consumers faced a 60% price hike to retain the same level of service, which can also occur in any other industry where companies need to adjust their pricing strategies due to cost increases, market conditions, or other strategic reasons.

User Suneel Kumar
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