By Ryan Mukoyama
If you don’t live under a rock you’ve probably heard of boba. A phenomenon of milk, tea, and chewy tapioca balls. In the past 7 or so years it has boomed, popularized mainly in the US and Asia, but also across the world, and has become a multi-billion dollar market. The global boba market has grown from 757 million in 2019 to 2.29 billion in 2022, despite enduring a COVID pandemic that massively impacted food service and created a tea shortage. And the growing boba market has no intentions to stop in its tracks. It is estimated that the global boba market will grow to 4.08 billion by 2030. However, have you ever noticed the slowly increasing price of boba? You used to be able to get one for $5 and now they can run you up to as much as $8. As someone who consumes more boba than the average person in the world, this is not good. There are two different economic principles that can provide an explanation for this change: The Law of Scarcity and The Law of Demand. Let’s explore the Law of Scarcity first. It states that in the event of a shortage, prices will increase. Due to the COVID Pandemic, during the years 2020-2021, the production of tea decreased in countries that are major producers, such as the US, Japan, and China. In addition, India is a major producer of many of the ingredients required to make black and green tea, but due to many new regulations, they have struggled in making deals to export their goods. All of this has led to a drop in the supply of tea. Given the shortage of tea, the price tag for it increases. Since tea is an intermediate good of boba, or a good used in the making of boba, an increase in the price of tea will increase the price of boba. When looking through the lens of the Law of Demand, as boba got more popular, the demand for it grew. Since demand increases, the demand curve shifts right, creating a new and higher equilibrium point in conjunction with the supply curve. This equilibrium point determines the price, and thus, since the equilibrium point is higher, the price is increased, too. In conclusion, the mixed factors of an increased price of tea and growing demand for boba over the years has caused this steep price hike by approximately 60%.
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