So my theory is that the price of coffee is quite closely related to the demand. The smaller the overall demand level, the more price inelastic the remaining coffee drinkers are.
So in Cairns, where locals are too sensible to drink a hot drink in a climate where winter mean its only 28 degrees, a not particularly good small cup of coffee costs $3.50 – strictly for the coffee addicts amongst the tourists.
In Melbourne, where there are a huge number of fussy coffee drinkers, I got a large cup of coffee for $2.00. Around Circular Quay, in Sydney where I work, my morning coffee is $2.50.
So it is true, Melbourne is the coffee capital of this great nation of ours.