Supply and demand — Economics, 7–10 years
Why the amount available and the number of buyers can push a price up or down. Economics, 7–10 years.
What supply and demand mean
Supply is how much of something sellers can offer, while demand is how much people want to buy. When many people want a few things, sellers may ask more; when plenty is left over, they may lower the price to find buyers.
The problem it helps solve
A seller has to decide how many things to make and what price might persuade people to buy them. Watching supply and demand gives clues, instead of making a wild guess, although it never predicts every person perfectly.
A lemonade stand
On a hot day, 10 children want lemonade, but a stand has only 4 cups ready. The seller could raise the price or make more cups, because demand is greater than supply. If the next day there are 20 cups and only 5 buyers, a lower price may help sell the extra cups.
The common mix-up
It is tempting to think that high demand always means a high price, or that sellers can choose any price they like. The missing part is supply: a price also depends on how much is available and whether buyers are willing or able to pay it.
Where it appears
You can see this when concert tickets, toys or fruit are scarce, or when a shop has too much stock. Weather, seasons and surprises can change supply and demand quickly, so the same item may cost different amounts at different times.
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