The economics of a cup of tea

A cup of tea at a Kerala roadside stall costs ten rupees. Trace that price backwards and you find a supply chain stretching from the estates of Munnar to the auction houses of Kochi, passing through pluckers, factories, brokers, blenders and distributors.

Of the ten rupees, the plucker who picked the leaves receives a fraction of a paisa. The stall owner, meanwhile, earns most of his margin not on the tea itself but on the biscuit he sells beside it — a pattern economists call cross-subsidy.

The lesson is not that tea is unfairly priced, though it may be. It is that prices are stories, and every story has an author. Understanding who sets the price, and why, is the beginning of understanding an economy.