31. In this argument a consulting firm recommends the transfer of investments from
Cola Loca to Early Bird Coffee because, during the next 20 years, coffee demand will
increase while cola demand will decrease. This prediction is based on the expectation
that the number of older adults will significantly increase over the next 20 years,
together with statistics, reportedly stable for the past 40 years, indicating that coffee
consumption increases with age while cola consumption declines with increasing age.
For three reasons, this financial advice may not be sound.
First, the argument assumes that relative supply conditions will remain unchanged
over the next twenty years. However, the supply and cost of cola and coffee beans, as
well as other costs of doing business as a producer of coffee or cola, may fluctuate
greatly over a long time period. These factors may affect comparative prices of coffee
and cola, which in turn may affect comparative demand and the value of investments in
coffee and cola companies. Without considering other factors that contribute to the
value of a coffee or cola company, the firm cannot justify its recommendation.
Secondly, the argument fails to account for the timing of the increase in coffee
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