Supply and Demand: The Force Behind a Cup of Coffee

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Learn how supply and demand shape pricing in this 6:41 minute video lesson on coffee economics.

Supply and demand are the two forces that decide what we produce, buy and consume. Supply refers to the number of things that sellers make at a certain price. Demand refers to how many goods and services consumers buy at a certain price. And if you go out and get a cup of coffee for $3, it's because the two forces met at this price following a phenomenon known as emergent order.

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COLLABORATORS
Script: Jonas Koblin and Jonas Jaquet
Artist: Pascal Gaggelli
Voice: Mithrilda
Coloring: Nalin
Editing: Oran Charoenlap
Sound Design: Miguel Ojeda
Creative Director: Selina Bador
Production Assistant: Bianka
Proofreading: Susan

SOUNDTRACKS
Tarantella - Adieu Adieu

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SOURCES

CLASSROOM EXERCISE
Ask your students to search for a Coffee Price Chart and you’ll find a graph showing the price of coffee in US Dollars. Then ask them to find out:
What’s the price of one kilogram of coffee today?
What do they think are the reasons that have caused the price to fluctuate in the past 5 years?

In addition you may challenge them to search for three coffee shops in the neighborhood that charge their customers different prices. Which one sells their coffee expensive and which one cheap? Was that price really set by the owner of the shop, or is it the result of constant changes in supply and demand — and the final price the phenomenon of an emergent order?

CHAPTER
00:00 Introduction
00:28 The force of coffee price
01:03 Understanding supply and demand
02:58 Influenced factor
04:11 Emergent order
04:33 Quantity demanded vs demand
05:28 Assignment
05:51 Patron's credits
06:00 Ending

#supplydemand #economics #sproutslearning

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Support us to make more videos on Economic topic at www.patreon.com/sprouts!

sprouts

Mathematically, I need to go through this again and put pen to paper to understand. But, this is a good introduction.

bboyneon

I needed this im writing on this tpoic tomorrow

TricksterBelebese

Those photos of supply are a graphic that are wonderfully cartooned.

MJChannel-hj

I am just months away from starting my business, thanks for the presentation

alvinfriesen

Great video!
Would love to see more economics topics cover here!

kolici

I think solution is demand and buy with no escalation but need of carrying the product not harm to avoid damage the product.

alvindon

The official 1000th Liker! Haha, I am now feeling lucky for real. Sprouts rocks by the way, thank you for the content you are putting out. Mwaa!!

tshegofatsosekome

Starting at about 4 minutes this video gets really blurry and then it fixes itself at about 5 min so it's definitely something wrong with the video.

MarkSteelman-icmc

There are a number of problems with this scenario, primarily with not stating the assumptions and simplifications or the evidence and real-world scenarios to back up this theoretical model.

Whilst it is true that supply, demand and price are all interconnected, it is a gross simplification to assume it falls an immutable law or trend that can be predictable. In reality markets are not efficient, advertising & branding is enormously influential and monopolies can easily bend or break these rules in a real-life scenario.

The first statement makes a hash of the concept of scarcity. There are not "unlimited" human wants, unless you are assuming all humans are endlessly greedy. But it is true there is a limited supply and the price mechanism can work as a means of balancing human wants with limited stuff. But more importantly, the goal of suppliers or sellers in a market is to get the highest price possible, to make the most profit possible. Whilst buyers, generally speaking, want to spend the lowest amount possible. A market is simply a set of rules and regulations that determines how these two parties of buyers and sellers, replicated over and over in different areas of the economy, interact and do business.

Often however it is that there are not many small buyers and sellers, even 100:1 but infact 1000:1 or even A few big sellers dominate a marketplace. This illustrates the problem that markets tend towards consolidation, which ultimately renders them inefficient and rent-seeking. Particularly for products that are seen as a daily necessity, as coffee is in the US and tea is in the UK, as well as real necessities like heat, electricity, water a market actor, middleman or seller will try and place themselves in the middle of said transaction and rig the market. This can be done through a variety of measures and was a foundation of the Gilded Age that led to the agrarian populism of the 1870s in the USA and progressive reform leading to the New Deal.

Basically, whilst most coffee sellers and producers may be reasonable, conscientious and want a decent price for their customers, in a 'free' (or should I say 'laissez-faire') marketplace, the most ruthless and profit-oriented actor will try and obtain controlling market share. See Amazon with books or Starbucks with coffee. They will then raise the price in the absence of competition, squeezing the wages of workers and gouging their customers in order to make huge profits, which are paid out in executive bonuses and share dividends (mostly held by a tiny proportion of the population, or indeed foreign investors. Often these big sellers do so by using their size to gain an unfair advantage, paying little tax or relying on external capital that competitors don't have access to to keep prices artificially low and bankrupt opponents.

However, in a robust, well-regulated market with aggressive antitrust enforcement to protect smaller sellers and strong labour unions, companies have to find ways to produce higher profits without rent-seeking. This leads to investment in productivity improvements, basically making more with less, or the same amount in less time. So if you could harvest coffee more quickly with mechanised machinery or indeed have a more robust crop, less likely to go fallow with poor weather or the plant is transported by ship rather than by air.

This is not to mention the enormous value and influence of brands, from Starbucks Coffee to Campbell soups, people tend to by almost exclusively from a name they trust. This has been true since the invention of the self-service supermarket.

artistsometimes

Market force is predictable by graphing supply and demand.

MJChannel-hj

Awesome video!

Another point with the 'price control' idea is that 'rent control' makes housing unaffordable.

Capitalism is rough, but every other system is infinitely worse.

LeviathantheMighty