Econ Lab · Markets
Demand and supply
Before a market can settle on a price, you need the two curves that pull on it. Buyers want more coffee when it is cheap, so demand slopes down. Cafes brew more when the price is high, so supply slopes up. Every market in this course is built from these two lines.
The catch is a small one that confuses almost everyone. There are two completely different things a curve can do.
Two curves run a market. Demand slopes down, because cheaper coffee is more wanted. Supply slopes up, because a higher price tempts cafes to brew more.
The dot sits at cups and a price of dollars. Drag it and you slide along the same demand curve: a pure price change, where a higher price means fewer cups wanted and a lower price means more. Nothing about the curve changed. That is the movement to keep apart from the shifts the sliders make.
Drag the dot to move along demand. Use the shift sliders to move the whole curves.
Moving along a curve
Drag the dot. You are sliding along the demand curve, reading off how many cups buyers want at each price. Nothing about the buyers has changed, only the price they face. This is a change in quantity demanded, and it never leaves the curve it started on.
Shifting the whole curve
Now nudge a shift slider. The entire curve jumps sideways. At every price, buyers now want a different amount. That only happens when something other than the price changes, like a rise in incomes, a new craze for coffee, or a cheaper substitute. This is a change in demand itself, and it moves the whole line.
Keep them straight and the rest of the course is easy. A price change moves you along a curve. Anything else shifts it.
What you just did
You set up the two curves and learned the one distinction that every later result leans on. Next you will let them meet, and watch a price emerge that no one chose.