The world income has the following relationship with the coffee market.

We can assume that coffee is a normal good. Therefore, if world income was to increase, then household income would increase. The higher household income would cause an increase in the demand for normal and luxury goods. The higher market demand is represented by a rightward shift in the demand curve.

The strength of the relationship is measured by the income elasticity of demand for coffee (YED).

The increase in demand will cause the PRICE OF COFFEE TO INCREASE. This will have further impacts on other markets. For instance,

• Tea (SUBSTITUTES) DEMAND will INCREASE
• Milk (COMPLEMENTS) DEMAND will DECREASE

The starting level of household income is set at stable. The input parameters can range between increase, stable and decrease.

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