Schiavenza said: “for a country where labor is cheap, Starbucks baristas in Beijing earn much less than their American colleagues, this may seem counterintuitive.” Labor is only one component of the business, while logistics is expensive. As for Starbucks, most of the materials are imported from the United States and South America to China. China is a great example of a transportation port that has invested billions of dollars over the years to improve transportation infrastructure. With new ports and investments it is the combination of taxes, tariffs and intermediaries that add to logistics costs which are then passed on to customers in the form of markups on Frappuccinos and Lattes. Price elasticity of demand is a measure of the responsiveness of demand for a product to price changes (Hill, 2002). We can interpret demand to be elastic when a small change in price produces a large change in demand such as status, "There is also the possibility that high prices may give the bar more prestige by making it seem like a gathering place for more affluent people ." customers”, (reported by Jing Daily, 2013). Firms also have the flexibility to make price inelastic when a large change in price produces only a small change in demand (Hill, 2002). In general, firms can charge higher prices when demand is inelastic. What determines the elasticity of demand is the level of income which is a factor that determines the elasticity of demand. When income levels are low, people tend to be more price conscious and demand is more elastic, but since Starbucks is considered a luxury drink in China, consumers are not concerned about the cost of the product, if the price increases or decreases, the demand for the drink is growing due to the recipients to whom the company sells it (Hill, 2002). The other main factor that influences price elasticity is the number of competitors in a market and if it were just coffee there would be a lot of them