Frost hits the coffee crop

The chain in words

1. Step 1

   Before the frost

   Coffee sells at 4 dollars a cup and 30 million cups change hands each week. The horizontal axis is millions of cups per week. The vertical axis is the price per cup. Demand and supply cross at E₀.

2. Step 2

   Supply shifts left

   The frost means fewer beans at every price, so supply shifts left. At the old price of 4 dollars, buyers still want 30 million cups, but roasters can now deliver only about 22 million. That gap is a shortage.

3. Step 3

   Price rises to clear the market

   Cafes with empty shelves raise prices. As the price climbs, some buyers switch to tea, a movement along the demand curve. The market settles at E₁: a higher price and fewer cups sold.

4. Step 4

   What did not move

   Demand never shifted. Buyers simply responded to a higher price by buying less. Fewer cups are sold because supply fell, not because people wanted less coffee.

Takeaway. A fall in supply raises the price and lowers the quantity: the two move in opposite directions.

Draw it yourself

More on the supply and demand graph