Economics Project: Analyzing Latte Coffee Market at Ultramarinos

This economics project analyzes the latte coffee market at Ultramarinos, a coffee shop in Hoboken, New Jersey. The project examines the demand and supply dynamics of latte, a popular product due to its flavor and consumption patterns. It explores the reasons behind latte's popularity, including its appeal to chefs and residents, its health benefits, and its relatively low price. The project utilizes Pareto efficiency to describe the firm's resource allocation and calculates the equilibrium price and quantity demanded using demand and supply functions. Furthermore, it discusses factors causing trade-offs in the market, such as competition and availability of raw materials. The project concludes with references to relevant sources.

Running Head: ECONOMICS 1
Project Management
Institution Affiliation
Name
Date

ECONOMICS 2
1
The coffee shop selected is Ultramarinos located on 260 third street in Hoboken in New
Jersey City on the Hudson river in United States of America. The Product chosen at
Ultramarinos shop is Latte type of espresso chocolate (Robb, 2014). Latte is popular product
because of its flavored ingredients from coffee and milk. The reason as to why Latte coffee
product is consumed at Ultramarinos is that latte is ever delicious at any room temperature. It is
sweet in both cases, either cold or hot.
The product is highly consumed because Hoboken City is one of the densely populated
town in New Jersey City. It is believed that when there is big population in relation to the
product, the sales of the product in question (Latte) are increased. Also, the tastes and preference
of people towards latte is high especially in both winter and summer periods (Robb, 2014). This
influences the consumption of latte coffee product to also keep high. This therefore increases the
sales and profits of Ultramarinos shop.
Another significant reason as to why Ultramarinos is chosen is that the city of Hoboken is
growing at a faster rate. This therefore increase the market for latte since most of the consumers
are well off. It is evident that when the consumers’ income increases, the consumption level of a
given commodity increases and vice versa.
2.
The service customers for Latte coffee are chefs in the town who provide morning and
evening coffee to the people. The Chefs who used latte product in 2018 emerged to be among the
nominees of James Beard awards due to the deliciousness of the coffee. In addition, the targeted
customers for the product are the residents of Hoboken and New Jersey City as a whole (Novak,

ECONOMICS 3
2014). The customers’ uniqueness of Ultramarinos or heterogeneity needs latte among the
customers. In addition, Latte is mostly sold at Ultramarinos shop because residents prefer it to
other substitutes due to the following reasons;
Latte is good for people’s heart health; it is evident that the product protects against the
heart ‘arterial damages’ from being brought up by inflammation. Studies say that Latte coffee
product consumers who take 2-3 cups in a day, have got lower risks of getting heart attacks when
compared to other drinks such as alcohol.
More so, Latte products when taken regularly, it enhances the general performance of the
body. Scientists say that Latte acts like any other drugs in reducing fatigue and as well
strengthening contraction of muscles. This therefore helps to reduce the pain due to increased
fatty acids in the endurance of blood support. Besides, coffee reduces the risk of being attacked
by Type 2 Diabetes since it helps to the body to gain insulin and proteins in order to avoid tissue
damage.
3.
The price of the product is $2 per each packet or cup of latte. The reason as to why the
product is mostly consumed by the customers is that it is relatively cheaper than other types of
coffee products. This is because its raw materials are locally made, thus reducing on its costs of
production such as transportation costs and other costs. It is evident that, when the price of the
product is relatively low, the seller sells more of the stock (Seidel, 2018). This increases the
value of money by selling the stock of the products in and out sock in the shorter time.
4.

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This project entails the use of Pareto efficiency allocation description of the firm. Pareto
efficiency indicates that the variation in allocation of resources in the market of the same product
makes the individual to gain (Chappelow, 2019). However, this situation can happen given that
other individuals in the question are not left worse off. In this case, the prosperity of
Ultramarinos shop in selling the Latte coffee products does not make other shops such as Blue
State Coffee, Willoughby’s Coffee and Tea as well as Jojo’s shop to loose (Seidel, 2018).
Therefore, it is evident that, when Ultramarinos maximize its profits it does not mean that the
counterpart shops in comparison are left in losses. The chosen shop therefore should provide for
better ways of operation in order to make firms in the market to gain as it is.
5.
Given the equilibrium demand function of Latte coffee product; Qd = 300 -50p and
quantity supplied function of the commodity per year; Qs = 100 + 50p. Estimate the price of
Latte and quantity demanded.
Formula; Qd = Qs
Qd =300 -50p ------------(i)
Qs = 100 + 50p ----------(ii)
300 -50p = 100 + 50p
To collect like terms;
100p = 200
P = $2

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Substitute P =2 in (ii)
Qd = 300 – 50(2)
Qd =200
This implies that the equilibrium price is $2 and the estimated quantity demanded for a product is
200 units
Figure 1: Price Intersection
Source: Author, 2019
Figure 1 shows the shift of demand of Latte per year. When Ultramarinos shop reduces
its price from 2$ to 1$, the quantity supplied will be low up to 150 units. This therefore leads to
the increment of demand for Latte coffee product from 200 units to 250. Therefore, the decisions
practiced by a single shop leads other shops in the market to lower prices due to competitive
market.

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Most significant is that, when Ultramarinos reduces the price for Latte, quantity supplied
will be low. However, the reduction in the price leads to increment of demand for latte drink and
vice versa.
6.
There are several factors that cause the trade-offs or capabilities in the market of products
that is to say Latte drink. These factors are as below;
The rising competition from other related products causes the variation in demand and
supply behavior of the product (Seidel, 2018). Furthermore, the presence of raw materials to
produce Latte drink. This therefore shows the trend of sales from the shop either positively or
negatively in relation to the product in question.
In addition, the availability of nature of labor employed can cause the trade-offs in sells.
This is due to the efficiency level being imparted by the employee to the clients of the
commodity.

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References
Chappelow, J.(2019). Pareto Efficiency. Retrieved from:
https://www.investopedia.com/terms/p/pareto-efficiency.asp
Novak, J. (2014). Top 20 coffee shops in America. Retrieved from:
https://www.usatoday.com/story/travel/destinations/2014/06/14/coffee-shops/10489389/
Robb, A. (2014).The 10 Best Coffee Shops in Jersey City and Hoboken. Retrieved from:
https://www.villagevoice.com/2014/06/02/the-10-best-coffee-shops-in-jersey-city-and-
hoboken/
Seidel, M. (2018). How to Calculate a Demand Function? Retrieved from:
https://bizfluent.com/how-5968857-calculate-demand-function.html