Answer to Question #230502 in Economics for molyy

Question

What do you think caused the large increase in the price of coffee in 1997? Explain your answer

Answer 1

Volatility in coffee markets is the norm, but 1997 was unusually volatile. Previous price swings of this magnitude were historically the results of extreme weather events. In 1997, however, low inventory levels and uncertainty about the effects of El Nino were cited as primary reasons for price increases.