A local coffee shop finds that every time they increase the price of their coffee, they sell fewer cups. However, they notice that when a new café opens nearby and offers lower prices, their sales drop even more. What principle of market equilibrium is demonstrated in this scenario?

When the shop raises its price, the quantity of coffee sold falls, showing the law of demand: higher prices lower quantity demanded. The opening of a cheaper café shifts the shop’s demand curve leftward, because consumers now prefer the lower‑priced alternative. This shift forces the market equilibrium to a lower price and a smaller quantity sold for the original shop. The situation illustrates how a change in supply conditions—here a new competitor—moves the equilibrium point by altering the demand side. In short, it demonstrates that equilibrium price and quantity adjust when demand curves shift due to price competition.