Supply & Demand

This interactive demonstrates how prices coordinate a market, using coffee as the example. A demand curve slopes down (at $2 a cup about 80 people buy daily; at $8, about 20). A supply curve slopes up (at $2 sellers offer about 14 cups; at $8, about 86). Where they cross - about $5 and 50 cups - the market clears: everyone willing to pay the price gets a cup, and no coffee goes unsold. No one chose $5; it emerges from buyers and sellers reacting to each other.

If the price sits above $5, sellers brew more than buyers take, and the unsold surplus pushes the price down. Below $5, buyers queue for scarce cups and bid the price up. A frost that destroys harvest shifts supply left: the new crossing point has a higher price and fewer cups. News that coffee is healthy shifts demand right: more cups at a higher price. A legal price ceiling below $5 creates a permanent shortage (the queue never clears); a floor above $5 creates a permanent surplus (coffee poured out every night). Rent control and minimum wages are the classic real-world debates over exactly these trade-offs - with reasonable economists disagreeing about how large the effects are in each market.