A Cup and a Question

Jul 20, 2025

2 min read

I will be honest with you all, I love coffee, perhaps even more than myself. Something is

soothing and calming about sipping on an iced mocha while talking to friends. But today,

when the waiter handed me a bill of Rs 300 for a small cup, I was astonished. For a student

surviving on a weekly allowance, this was too much. I started thinking how something that

costs so less can be sold for so much. This is how I began writing this blog, or perhaps even

started my blogging journey.

Coffee vs Cafe

Upon researching, I found out that the milk, coffee powder, water, sugar and maybe the ice

cream which we use to make coffee at home cost no more than Rs 40. But in a cafe, we aren't

paying for the coffee itself, we are paying for what it costs to keep the cafe running, be it

the salary, rent, interest, profits, etc.

Worth vs Cost

Businesses mostly use value-based pricing rather than cost-based pricing.

In simpler words, enterprises charge you for the experience. It can be for the ambience, a

hangout place with friends, air conditioning, an instagrammable pic, and so on.

☕ So, what you paid for wasn’t just a drink—it was an experience. And all of those

Background costs factor into the price.

Psychology and Behaviour

If we dive into basic consumer demand and supply, then we get to know that if demand rises,

then supply also rises. But in the cases of cafe and caffeine, there is an element of behaviour too.

Cafes not only sell coffee or other eatables, but feelings and social proofs.

E.g., if your friend asks you to meet them at Starbucks, then this not only signifies an invitation from him/her to you, but also status and trends.

🎯 These strategies create brand loyalty, FOMO, and emotional spending—things that

influence teenagers the most.

Cafes vs Roadside Stalls

The above-listed facts are the reason why the coffee on roadside stalls costs way less. A coffee

in Starbucks or Blue Tokai sell you psychological luxury and a sense of status, whereas a

roadside stall just sells you coffee. In economics, this results in:

Inelastic demand: Even if prices rise, loyal customers don’t leave.
Monopolistic competition: Different cafés offer different “experiences" , not just drinks.
Each one becomes its niche.

Conclusion

As a student, I still think twice before spending Rs 300 on a coffee, but what I keep in mind

now is -

And that’s why economics is everywhere. Not just in budgets or textbooks—but in cold

coffee too.

Let's get interactive

Would you spend Rs 300 on a coffee

✍️ Author Note

Thanks for reading my first post on Unlocking Economics. I hope it made you think a little differently about your next coffee bill!

Recent Posts