How does the law of supply interact with the price elasticity of demand to affect market equilibrium when a price increase occurs?

When the price of a good rises, the law of supply tells sellers to produce more because higher prices make it more profitable to supply. At the same time, the price elasticity of demand shows how sensitive buyers are to that price change: if demand is elastic, the quantity demanded falls sharply. The new equilibrium is reached where the increased supply meets the reduced demand, often at a lower price than the initial rise would suggest. For example, if coffee prices jump, coffee producers supply more, but because coffee is somewhat elastic, many consumers cut back, so the market price settles lower than the original increase and the quantity sold may actually rise or fall depending on the elasticity. Thus, the interaction of supply’s upward response and demand’s elasticity determines how much the price and quantity adjust in the new equilibrium.