Pu’er is a city in southern China that is famous for its tea, but is now getting a reputation for its coffee. Between 2009 and 2012, the world price of coffee beans nearly doubled. Farmers in Pu’er responded to the higher price by doubling the acreage of coffee, and cleared forested hillsides to grow more beans. At the relatively high world price, a hectare of coffee earns a family about $10,000 per year, which is three times the earnings from growing tea and five times the earnings from growing rice. The farmers’ response illustrates the law of supply: an increase in price increases the quantity supplied.

Question.

How do producers respond to an increase in price?