It seems as though has Starbucks had pushed for too much growth around the time of the most recent recession. After only being open for months many of these newly opened stores are being closed down due to unprofitability. Starbucks has tried to grow too big, too fast, and right on the brink of an impending recession. They needed to majorly scale back operations in order to support a long run growth. The company most likely found itself experiencing diseconomies of scale and therefore needed to cut back operations in order to support its short run costs. This would allow them to remain open for the short run and expand in the long run.
The coffee industry is an excellent example of a perfectly competitec market. Buyers and sellers are all small in comparison to the industry. It won't make a big deal in the market if I buy coffee from them, the corner store, or make it at home. One could however argue that preference is given to which coffee one purchases. In my opinion I prefer Tim Horton's and find Starbucks to be far too expensive. If Starbucks were to lower their price, they would lower their supply, but the demand would increase. Unless the company expanded, so as to lower their costs, then they could increase their supply again to meet the increased demand.
The graph shows that a lower price would lead to an increased demand and a lower supply. The company would certainly need to be able to expand, experiencing economies of scale of course, to be able to meet up with this new demand.
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