The graph is a snapshot of a competitive market. Each item you collect changes one condition while holding the others constant, and the graph compares the new equilibrium with the previous one.
1. Household income
For a normal good, more income increases demand at every price. The demand curve shifts to the right. A coin stands for that rise in income; it is not an increase in the amount of money in the economy.
Demand → · price ↑ · quantity ↑
2. Cheaper inputs
Each item stands for more plentiful inputs and lower production costs across the market. Producers supply more at every price. Supply shifts to the right.
Supply → · price ↓ · quantity ↑
3. Technology
A more efficient technique lowers the cost per unit. Here, the market’s producers adopt the improvement, which shifts supply to the right.
Supply → · price ↓ · quantity ↑
4. Preference for coffee
Consumers come to like coffee more. Even with income held constant, they want to buy more at every price. Demand shifts to the right.
Demand → · price ↑ · quantity ↑
5. Per-unit tax
A tax collected from producers drives a wedge between what buyers pay and what sellers receive, net of tax. Here, buyers pay more, producers receive less, and fewer coffees are traded.
Buyer price ↑ · producer price ↓ · quantity ↓
6. Per-unit subsidy
The government pays producers a fixed amount per unit. Consumers pay less and producers receive more, counting the subsidy. Quantity rises, but there is public spending.
Buyer price ↓ · producer price ↑ · quantity ↑
Shift of the curve ≠ movement along the curve. Income, preferences, costs, and technology can shift curves. When only the price of coffee itself changes, there is a movement along a given curve. The change in the equilibrium price here is a result of the shift.
- Demand and quantity demanded
- Demand is the whole relationship between prices and the quantities consumers are willing and able to buy. Quantity demanded is one point on that relationship, at a specific price.
- Supply and quantity supplied
- Supply is the relationship between prices and the quantities producers are willing to sell. Quantity supplied corresponds to a specific price.
- Equilibrium
- The price and quantity at which quantity demanded equals quantity supplied. Equilibrium does not, by itself, mean fairness or the absence of social problems.
- Normal good and inferior good
- When income rises, demand for a normal good increases; demand for an inferior good decreases. “Inferior” describes the relationship with income, not the quality of the product. In the game, coffee is a normal good.
- Tax incidence
- Whoever is legally required to pay the tax does not necessarily bear its full economic cost. The split depends on the relative elasticities of supply and demand. In this linear model with symmetric slopes, the effect is split equally between the two prices.
See the model behind the game
Demand: Pc = 20 + d − 0.1Q
Supply: Pp = 4 + s + 0.1Q
Policy: Pc − Pp = t − g
Equilibrium: Q = (16 + d − s − t + g) / 0.2
Pc is the price paid by consumers. Pp is what producers receive, net of tax or including the subsidy. d shifts demand; s shifts supply; t is the tax and g the subsidy, both per unit.
In the first four levels, each item shifts the curve’s intercept by $0.80; that doesn’t mean a household’s income rose by only $0.80. In the last two, each item raises the tax or subsidy by $0.80 per coffee. Each level starts at Q = 80 and P = $12.00. The green supply curve uses Pc = 4 + s + 0.1Q + t − g. Dashed gray lines show the curves before the latest item; the gray dot shows the previous equilibrium. Taxes raise t × Q in revenue; subsidies cost g × Q in spending.
This is a simplified static model. It doesn’t capture how the government is financed, externalities, long-run effects, or every form of production and competition. Collecting a policy teaches its effect in the model; it doesn’t show that the policy is always desirable.