Economics and Starbucks?

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bookie90

New member
In my economics class we were discussing elasticity and profit. Why does starbukcs has so many different prices? Why don't they just have one price and charge for extras?
 
Remember how the demand curve is downward sloping? At a really high price, there are still some people who are willing to buy a good.
Normally, a firm can't capture the high profit of that price because they have to charge all customers the same price for the same good.
But if it's possible to charge people different prices based on what they are willing to pay then you can really increase your profits.
Car dealers do this by haggling. Starbucks does it by inventing 100 different ways to sell coffee. Apparently, most people will buy the one that costs the same as the maximum amount they are willing to pay.
 
It's almost a form of price discrimination -- some people will pay more and some will pay less for "a drink", so you offer a lot of combinations in hopes of capturing the most money each is willing to pay.

If you had a basic drink, plus optional extras, it suddenly is clear how expensive the extras are, and many people will decline spending that extra money.

This is all a way for Starbucks to try to capture what would otherwise be consumer surplus. There are plenty of idiots who'll pay $5 for a fancy coffee drink, and Starbucks doesn't want to sell them only a $2 drink and leave the rest of the money on the table.
 
Because it's different products, which have different prices. Such as Americano's, which are just expresso shots, sometimes with water added.
 
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