Why Starbucks Costs More Than Your Local Café: A Lesson in Branding and Elasticity

Have you ever walked into Starbucks and thought, “Wait… this latte costs $5?” You’re not alone. On the surface, it’s just a drink — coffee beans, milk, maybe some syrup. But there’s a lot more happening behind that price tag.

Economists call this price elasticity of demand (PED for short) — a way to measure how sensitive customers are to price changes. Simply put: if the price of something goes up a little, will people still buy it?

Branding Makes a Difference

Starbucks isn’t just selling coffee. They’re selling:

• A global brand you recognize anywhere in the world.

• Cozy cafés where people feel comfortable working or meeting friends.

• A “premium” experience that feels worth the extra dollars.

Because of this, Starbucks customers are less sensitive to price increases. Even if your latte goes up by $1, you’ll probably still buy it.

On the other hand, if your local café raised its prices by the same amount, regulars might think twice — the café doesn’t have the same brand pull. That’s why Starbucks can charge more while a local spot can’t.

Elasticity in Action

The key idea is: the more unique and desirable a product feels, the less elastic its demand. People will pay extra for what they perceive as better, exclusive, or special. Coffee beans are just beans — but the experience? That’s priceless (or at least, close enough).

Final Words from Me 💭

I’ll admit it — I’ve paid for a Starbucks Matcha Latte even when I know many local cafés have better lattes for cheaper. Sometimes, it’s just about convenience: when you’re in a rush, you just want something reliable and predictable.

I know it’s a bit of consumerism, but I also think that’s okay — at the end of the day, people choose what makes them happy. For me, Starbucks is more of a treat than a daily habit, and sometimes it’s just simpler to go with what I know.

– Cristabelle Chang Founder, Econaeva