Final answer:
The law of demand describes how a higher price leads to lower demand, while the law of supply states that a higher price results in a higher quantity supplied. The confusion in the question comes from mixing these two laws, which are foundational to understanding price changes and market behavior.
Step-by-step explanation:
The student's question appears to confuse the law of demand with the law of supply. To clarify, the law of demand posits that, when all other factors are constant, the higher the price of a good, the less people will demand that good. Conversely, the higher the demand for an item, the lower the price goes. This is because the increased price of a good raises the opportunity cost of purchasing it, hence consumers are less likely to buy it and more likely to search for alternatives.
On the other hand, the law of supply indicates that a higher price typically leads to a greater quantity supplied because producers are more inclined to produce and sell more at higher prices, given that their potential profits are higher. Price changes thus affect both consumer demand and producer supply. If we consider the example of coffee having its price decreased to $2, we would see an adherence to the law of demand as the quantity demanded would increase. However, for producers, this lowered price would reduce the incentive to produce coffee, potentially leading to a market disequilibrium, where the quantity demanded exceeds the quantity supplied at that price level.