of business.

Since demand for food is generally inelastic, farmers may often face the situation in Figure 5.8 (a). That is, a

surge in production leads to a severe drop in price that can actually decrease the total revenue that farmers
receive. Conversely, poor weather or other conditions that cause a terrible year for farm production can

sharply raise prices so that the total revenue that the farmer receives increases. The Clear It Up box discusses

how these issues relate to coffee.

CLEAR IT UP

How do coffee prices fluctuate?
Coffee is an international crop. The top five coffee-exporting nations are Brazil, Vietnam, Colombia, Indonesia, and

Ethiopia. In these nations and others, 20 million families depend on selling coffee beans as their main source of

income. These families are exposed to enormous risk, because the world price of coffee bounces up and down. For
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