Coffee Beans Get Expensive
A rise in the cost of an input shifts supply left, raising price and cutting quantity.
Coffee Beans Get Expensive
Supply and DemandA rise in the cost of an input shifts supply left, raising price and cutting quantity.
Equilibrium at Quantity 57, Price ($) 44
Start in equilibrium
The market for brewed coffee begins where supply and demand cross. At this price the amount cafes want to sell matches the amount customers want to buy, so nothing is pushing price either way.
Now try it yourself: shift the curves in a graded FRQ drill, or open this graph in the free sandbox.
Coffee Beans Get Expensive, step by step
- 1
Start in equilibrium
The market for brewed coffee begins where supply and demand cross. At this price the amount cafes want to sell matches the amount customers want to buy, so nothing is pushing price either way.
- 2
Green bean prices jump
A poor harvest abroad raises the price of green coffee beans, the main input. Every cup now costs cafes more to produce, so at any given price they are willing to supply fewer cups than before. Supply shifts left.
- 3
A shortage appears at the old price
At the original price the quantity customers still want exceeds the smaller quantity cafes will now supply. That shortage is what forces the price up; it is not a permanent state of the market.
- 4
New equilibrium
As price rises, some customers drop out and move up along the demand curve while cafes are willing to serve more than at the very lowest price. The market settles at a higher price and a lower quantity than before.
- 5
Read the outcome carefully
Only supply moved. Demand did not shift, so nobody wants coffee any less than they did: the fall in quantity is buyers moving ALONG an unchanged demand curve in response to the higher price. Calling this a fall in demand is the most common way to lose the point.
Where it ends up
The equilibrium price rises and the equilibrium quantity falls.
Now draw it yourself
Same graph, graded on whether you move the right curve and leave the rest alone.
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