One great example of supply and demand is you do your everyday routine at the local market and you buy a 6 pack of beer everyday, well you go in the store on Wednesday and you notice a sale buy one 6pack and get one ½ off. What you have done by purchasing the second one is increase the demand and then they will supply the item. Supply and demand runs our market and our economy without supply and demand we would be a deficit country.
As prices increase, the quantity demanded for that item decrease. If the price decreases then the quantity demand for that item increases. One good example is satisfying some one else’s needs you then have an increase.
Demand is changed by population, expectation, price of related goods, and buys a change in people’s taste. Demand will never change because of price. Only Quantity demand will change because of price.
The Law of Supply works much like the Law of Demand. The higher the price is the more quantity there is. To have more produced more money needs to be paid. This relationship can be seen on the graph below. Together Supply and Demand help set the price for the goods in the market. The relationship between Supply and Demand can be seen in the graph below.
The point where the supply and demand line cross is where the price is of a product is set. There are many examples of this relationship seen in today’s world and throughout history.
In 1974 water was a very simple and cheap product in California. Then in 1975 a big drought hit California. Water became so rare that water had to be rationed per household. Nothing was used to do anything with water. No water was left to go to waste. Since water was so rare, people were willing to pay more for it. People found ways to reduce their consumption of water. As the quantity of water decreases, the price of the water increases.
America is a country where we depend on our oil. When we lose our trade with these nations that we depend so much for oil we find ourselves short on what once was an high supply. The only way to recover from this shortage is to produce the oil ourselves. For us to produce oil in the U.S the price would go up major ally. As the price of oil increases, the quantity of oil increases. It’s kind of like a fashion trend with clothes when something new comes on the market people all go for it and it drives a demand to consumers.
The law of Supply and Demand allows us to see how prices and quantity of products relate to one another. Supply and Demand is everywhere in our economy and we live it everyday.