{"id":5089,"date":"2016-07-20T21:05:27","date_gmt":"2016-07-20T21:05:27","guid":{"rendered":"https:\/\/courses.lumenlearning.com\/microeconomics\/?post_type=chapter&#038;p=5089"},"modified":"2016-07-20T21:05:27","modified_gmt":"2016-07-20T21:05:27","slug":"why-it-matters-supply-and-demand","status":"publish","type":"chapter","link":"https:\/\/courses.lumenlearning.com\/atd-herkimer-microeconomics\/chapter\/why-it-matters-supply-and-demand\/","title":{"raw":"Why It Matters: Supply and Demand","rendered":"Why It Matters: Supply and Demand"},"content":{"raw":"<h2>Why analyze how buyers and sellers interact in a free and competitive market to determine prices and quantities of goods?<\/h2>\nDo you pay attention to the cost of a cup of coffee? Most people recognize that when they make coffee at home it's cheaper than buying a cup of coffee that someone else has made. You've probably also noticed that some coffee places\u00a0are more expensive than others\u2014a cup of coffee at Starbucks usually\u00a0costs more than one at a gas station, for instance. Regardless of where you decide to buy coffee, the price can\u00a0change dramatically.\n\n[caption id=\"attachment_5381\" align=\"aligncenter\" width=\"764\"]<a href=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images-archive-read-only\/wp-content\/uploads\/sites\/1511\/2016\/05\/15205637\/Coffee-Prices.jpg\" rel=\"attachment wp-att-5381\"><img class=\"wp-image-5381 size-full\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/343\/2016\/07\/20205815\/Coffee-Prices.jpg\" alt=\"Between 2006 and 2016 coffee prices have increased 29%, but this difference is dwarfed by a spike in 2011. In that year, coffee prices rose almost 300% from the prior year.\" width=\"764\" height=\"394\"\/><\/a> <strong>Figure 1. Coffee Prices<\/strong>. Source: Trading Economics[\/caption]\n\nWhile retailers make decisions about how much\u00a0they will mark up the coffee drinks they sell, the underlying coffee prices all around the world are driven by supply and demand. Brazil accounts for 33 percent of all coffee production in the world, and in 2011 the country experienced a drought. Coffee trees had already been weakened by environmental factors, and the drought had a significant impact on production levels.\n\nHow did individuals react to this kind of shortage? Did the shortage have an impact on\u00a0price? \u00a0Take a look at the graph in Figure 1, above. You can see from the sharp spike in\u00a02011 that a shortage in the supply of coffee did indeed have an impact on price. But what do we know about the demand for coffee during that time? Did coffee consumption levels fall? To answer these questions, we need to know more about how buyers and sellers interact in the marketplace. In short, we need to understand supply and demand.\n\nIn this section you'll learn about these key economic factors\u00a0and the laws that govern them. Understanding supply and demand\u00a0is not only essential to the study of economics\u2014it may also help you be a better-informed consumer and make knowledgeable decisions about everything from your next cup of Joe\u00a0to your next job.\n<h3>Learning Outcomes<\/h3>\n<ul><li>Describe and differentiate between the major economic systems<\/li>\n\t<li>Explain the determinants of demand<\/li>\n\t<li>Explain the determinants of supply<\/li>\n\t<li><span data-sheets-value=\"{&quot;1&quot;:2,&quot;2&quot;:&quot;Define and graphically illustrate equilibrium price and quantity;&quot;}\" data-sheets-userformat=\"{&quot;2&quot;:15105,&quot;3&quot;:{&quot;1&quot;:0},&quot;11&quot;:0,&quot;12&quot;:0,&quot;14&quot;:{&quot;1&quot;:2,&quot;2&quot;:2236962},&quot;15&quot;:&quot;Calibri&quot;,&quot;16&quot;:11}\">Define and graphically illustrate market equilibrium, surplus, and shortage<\/span><\/li>\n<\/ul>","rendered":"<h2>Why analyze how buyers and sellers interact in a free and competitive market to determine prices and quantities of goods?<\/h2>\n<p>Do you pay attention to the cost of a cup of coffee? Most people recognize that when they make coffee at home it&#8217;s cheaper than buying a cup of coffee that someone else has made. You&#8217;ve probably also noticed that some coffee places\u00a0are more expensive than others\u2014a cup of coffee at Starbucks usually\u00a0costs more than one at a gas station, for instance. Regardless of where you decide to buy coffee, the price can\u00a0change dramatically.<\/p>\n<div id=\"attachment_5381\" style=\"width: 774px\" class=\"wp-caption aligncenter\"><a href=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images-archive-read-only\/wp-content\/uploads\/sites\/1511\/2016\/05\/15205637\/Coffee-Prices.jpg\" rel=\"attachment wp-att-5381\"><img loading=\"lazy\" decoding=\"async\" aria-describedby=\"caption-attachment-5381\" class=\"wp-image-5381 size-full\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/343\/2016\/07\/20205815\/Coffee-Prices.jpg\" alt=\"Between 2006 and 2016 coffee prices have increased 29%, but this difference is dwarfed by a spike in 2011. In that year, coffee prices rose almost 300% from the prior year.\" width=\"764\" height=\"394\" \/><\/a><\/p>\n<p id=\"caption-attachment-5381\" class=\"wp-caption-text\"><strong>Figure 1. Coffee Prices<\/strong>. Source: Trading Economics<\/p>\n<\/div>\n<p>While retailers make decisions about how much\u00a0they will mark up the coffee drinks they sell, the underlying coffee prices all around the world are driven by supply and demand. Brazil accounts for 33 percent of all coffee production in the world, and in 2011 the country experienced a drought. Coffee trees had already been weakened by environmental factors, and the drought had a significant impact on production levels.<\/p>\n<p>How did individuals react to this kind of shortage? Did the shortage have an impact on\u00a0price? \u00a0Take a look at the graph in Figure 1, above. You can see from the sharp spike in\u00a02011 that a shortage in the supply of coffee did indeed have an impact on price. But what do we know about the demand for coffee during that time? Did coffee consumption levels fall? To answer these questions, we need to know more about how buyers and sellers interact in the marketplace. In short, we need to understand supply and demand.<\/p>\n<p>In this section you&#8217;ll learn about these key economic factors\u00a0and the laws that govern them. Understanding supply and demand\u00a0is not only essential to the study of economics\u2014it may also help you be a better-informed consumer and make knowledgeable decisions about everything from your next cup of Joe\u00a0to your next job.<\/p>\n<h3>Learning Outcomes<\/h3>\n<ul>\n<li>Describe and differentiate between the major economic systems<\/li>\n<li>Explain the determinants of demand<\/li>\n<li>Explain the determinants of supply<\/li>\n<li><span data-sheets-value=\"{&quot;1&quot;:2,&quot;2&quot;:&quot;Define and graphically illustrate equilibrium price and quantity;&quot;}\" data-sheets-userformat=\"{&quot;2&quot;:15105,&quot;3&quot;:{&quot;1&quot;:0},&quot;11&quot;:0,&quot;12&quot;:0,&quot;14&quot;:{&quot;1&quot;:2,&quot;2&quot;:2236962},&quot;15&quot;:&quot;Calibri&quot;,&quot;16&quot;:11}\">Define and graphically illustrate market equilibrium, surplus, and shortage<\/span><\/li>\n<\/ul>\n\n\t\t\t <section class=\"citations-section\" role=\"contentinfo\">\n\t\t\t <h3>Candela Citations<\/h3>\n\t\t\t\t\t <div>\n\t\t\t\t\t\t <div id=\"citation-list-5089\">\n\t\t\t\t\t\t\t <div class=\"licensing\"><div class=\"license-attribution-dropdown-subheading\">CC licensed content, Original<\/div><ul class=\"citation-list\"><li>Why It Matters: Supply and Demand. <strong>Authored by<\/strong>: Steven Greenlaw and Lumen Learning. <strong>License<\/strong>: <em><a target=\"_blank\" rel=\"license\" href=\"https:\/\/creativecommons.org\/licenses\/by\/4.0\/\">CC BY: Attribution<\/a><\/em><\/li><\/ul><\/div>\n\t\t\t\t\t\t <\/div>\n\t\t\t\t\t <\/div>\n\t\t\t <\/section>","protected":false},"author":18,"menu_order":1,"template":"","meta":{"_candela_citation":"[{\"type\":\"original\",\"description\":\"Why It Matters: Supply and Demand\",\"author\":\"Steven Greenlaw and Lumen Learning\",\"organization\":\"\",\"url\":\"\",\"project\":\"\",\"license\":\"cc-by\",\"license_terms\":\"\"}]","CANDELA_OUTCOMES_GUID":"","pb_show_title":"on","pb_short_title":"","pb_subtitle":"","pb_authors":[],"pb_section_license":""},"chapter-type":[],"contributor":[],"license":[],"class_list":["post-5089","chapter","type-chapter","status-publish","hentry"],"part":5087,"_links":{"self":[{"href":"https:\/\/courses.lumenlearning.com\/atd-herkimer-microeconomics\/wp-json\/pressbooks\/v2\/chapters\/5089","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/courses.lumenlearning.com\/atd-herkimer-microeconomics\/wp-json\/pressbooks\/v2\/chapters"}],"about":[{"href":"https:\/\/courses.lumenlearning.com\/atd-herkimer-microeconomics\/wp-json\/wp\/v2\/types\/chapter"}],"author":[{"embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/atd-herkimer-microeconomics\/wp-json\/wp\/v2\/users\/18"}],"version-history":[{"count":1,"href":"https:\/\/courses.lumenlearning.com\/atd-herkimer-microeconomics\/wp-json\/pressbooks\/v2\/chapters\/5089\/revisions"}],"predecessor-version":[{"id":5256,"href":"https:\/\/courses.lumenlearning.com\/atd-herkimer-microeconomics\/wp-json\/pressbooks\/v2\/chapters\/5089\/revisions\/5256"}],"part":[{"href":"https:\/\/courses.lumenlearning.com\/atd-herkimer-microeconomics\/wp-json\/pressbooks\/v2\/parts\/5087"}],"metadata":[{"href":"https:\/\/courses.lumenlearning.com\/atd-herkimer-microeconomics\/wp-json\/pressbooks\/v2\/chapters\/5089\/metadata\/"}],"wp:attachment":[{"href":"https:\/\/courses.lumenlearning.com\/atd-herkimer-microeconomics\/wp-json\/wp\/v2\/media?parent=5089"}],"wp:term":[{"taxonomy":"chapter-type","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/atd-herkimer-microeconomics\/wp-json\/pressbooks\/v2\/chapter-type?post=5089"},{"taxonomy":"contributor","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/atd-herkimer-microeconomics\/wp-json\/wp\/v2\/contributor?post=5089"},{"taxonomy":"license","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/atd-herkimer-microeconomics\/wp-json\/wp\/v2\/license?post=5089"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}