Question

For a while, Southern Brewers is the only coffee supplier in the market. Eventually, Albert Coffee enters the market and sells coffee at lower prices than Southern Brewers does. Later, Café Brites enters the same market with lower prices for coffee. Southern Brewers now charges lower prices than Albert Coffee and Café Brites do. What made Southern Brewers lower its prices?

Answer 1

Answer: Competition

Explanation:

Southern Brewers lowered its prices to make them competitive considering the prices of Albert Coffee Café Brites.

A decrease in the supply of raw materials is incorrect because that would increase their price and consequently the price of coffee, but this is not the case in this example. There is not a higher demand from consumers, as they now have more options for where to buy coffee. And there are no references to government policies that required Southern Brewers to lower the prices.