Demand for Coffee: The Role of Prices, Preferences and Market Power

Abstract

The purpose of this paper is to evaluate the role of prices in determining demand for roasted coffee in Sweden. This is of interest because many believe that consumer prices are high relative to green coffee-bean prices, and that lower consumer prices would increase demand for coffee beans. Coffee demand is estimated on data for the period 1968-2002. In the long run, changing preferences appear to determine demand for roasted coffee, and a reduction in consumer prices would only have a temporary impact on consumption. Hence a permanent decrease in consumer prices would only increase exports of coffee beans to Sweden for a couple of years.