Glossary · Economic ideas
Supply and demand
Supply and demand explains prices: when buyers want more of something than sellers offer, the price rises; when there is more than buyers want, it falls.
Also called: law of supply and demand, demand curve, supply curve, market equilibrium
Oct 2026. Peak: $10.75 in Jan 2025; 2022 average: $2.39.
In plain words
Think of concert tickets. If 10,000 fans want seats in a hall with 2,000, tickets get expensive fast. If the band plays a stadium with 50,000 seats, they are cheap. Nothing about the music changed: only how many people want something compared with how much of it there is. That tug of war is supply and demand.
Demand is how much people want to buy at each price: the higher the price, the less they buy. Supply is how much sellers offer at each price: the higher the price, the more they want to sell. The price settles where the two meet, the point economists call the equilibrium.
When something shifts, the price moves. A bad harvest cuts supply and the price jumps; a new fashion lifts demand and the price climbs; a flood of new producers pushes it down. Prices are how a market tells millions of people what has become scarce.
Example
Cocoa, 2023–2025: a supply shock in real life
Most of the world’s cocoa comes from a few countries in West Africa. In 2023 and 2024 bad weather and plant disease shrank their harvests, while chocolate makers still wanted as much as before.
- In 2022 cocoa cost on average $2.39 a kilogram.
- As the shortfall became clear, buyers bid against each other for the beans that were left. By Jan 2025 the price reached $10.75, 4.49 times the 2022 level.
- High prices then worked on both sides: chocolate makers bought less and shrank their bars, and farmers had every reason to plant and tend more trees.
- In Oct 2026 the price was $5.75, 46% below the peak.
Nobody set the world price of cocoa: it moved with every trade on the cocoa markets of London and New York.
One level deeper
Economists draw demand and supply as two lines, with the price up the side and the quantity along the bottom. Moving along a line is a change in price; shifting a whole line is a change in conditions: incomes, tastes, the weather, the cost of inputs, the number of sellers. Mixing the two up is a common mistake in reading the news.
How far a price must move depends on elasticity. Gasoline and medicine have few substitutes, so a small shortage sends prices flying; for one brand of cereal, buyers simply switch. In the short run supply is often stuck too: a young cocoa tree takes years to bear fruit, so the price has to do almost all the adjusting.
When a rule holds a price below the meeting point (a price ceiling), buyers want more than sellers offer and lines form. A rule that holds it above (a price floor) leaves unsold surpluses. Economists argue about when such rules are worth it, but rarely about these side effects.
The cocoa price since 2000
The world price of cocoa beans, month by month. From 2000 to 2022 it stayed between $0.86 and $3.53 a kilogram; the poor West African harvests of 2023–24 sent it to $10.75 in Jan 2025.
The numbers behind the chart
| Date | Cocoa, $ per kg |
|---|---|
| Jan 2000 | $0.92 |
| Dec 2000 | $0.89 |
| Dec 2010 | $3.06 |
| Dec 2020 | $2.41 |
| Dec 2022 | $2.51 |
| Dec 2023 | $4.21 |
| Dec 2024 | $10.32 |
| Dec 2025 | $5.78 |
| Oct 2026 | $5.75 |
Why it matters
Almost every price you pay, from rent to concert tickets to the interest on a loan, is set by some mix of supply and demand.
It explains booms and busts in commodities: a frost in Brazil moves the price of your coffee, trouble near oil fields moves the price of gasoline.
Prices are signals. A high price tells producers to make more and buyers to use less, which is how most shortages end.
A common mistake
Myth: Sellers set prices however they like.
In fact: Sellers can name any price, but buyers decide whether to pay it. In a market with many sellers, a shop that asks far more than its rivals sells nothing. Sellers have real power over prices only when buyers have nowhere else to go, as with a monopoly.
Questions people ask
What is the law of supply and demand?
Other things being equal, a higher price makes buyers want less and sellers offer more. The price tends to move toward the level where the amount people want to buy equals the amount offered.
What happens when demand goes up?
If supply stays the same, the price rises, and the higher price draws in extra supply. Over time new producers often come in, which can push the price back down.
Why did cocoa and chocolate get so expensive?
Poor harvests in West Africa in 2023–24 cut the supply of cocoa beans while demand stayed strong. The world price peaked at $10.75 a kilogram in Jan 2025, up from about $2.39 in 2022. Chocolate prices follow with a delay, because makers buy their beans months ahead.
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About the numbers
- The numbers on this page are recalculated from the data every night; the sources are listed at the end of the page.
- Cocoa: World Bank Commodity Price Data (The Pink Sheet), CMO-Historical-Data-Monthly.xlsx, sheet "Monthly Prices", column "Cocoa"; edition updated 2026-11-03; values through 2025-12 from the January 2026 edition (https://thedocs.worldbank.org/en/doc/18675f1d1639c7a34d463f59263ba0a2-0050012025/related/CMO-Historical-Data-Monthly.xlsx).
- Prices are in nominal US dollars. The newest months of the World Bank’s Pink Sheet are rounded and can be revised.
- This page explains a term. It is not investment advice.