Supply and Demand Shift Examples

Here are some examples of shifts in supply and demand using the coffee market!

a) a blight on coffee plants kills off much of the Brazilian crop

First, if a blight kills off coffee plants then we will see a decrease in supply.  This happens because productivity goes down (because the plants are GONE).  Nothing happens to demand, so equilibrium price and quantity both go up.

b) coffee workers organize themselves into a union and gain higher wages

If coffee workers organize themselves into a union and gain higher wages the price of inputs will go up, so supply will shift left (a decrease in supply).

c) coffee is shown to cause cancer in laboratory rats

If coffee is shown to cause cancer in rats, then people will be less likely to buy it because they may fear that they themselves will get cancer.  This results in a change in consumer tastes and preferences in a negative manner that decreases demand (shifts it left).  A decrease in demand will lower both equilibrium price and quantity.

d) price of tea declines

If the price of tea declines, then the price of a substitute for coffee has gone down (if you agree that coffee and tea are substitutes).  Since tea is now cheaper, more people will buy tea, and less will buy coffee.  This results in a decrease in demand for coffee.  The market results are identical to the cancer in rats example.

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