How do supply and demand determine market prices?

Supply and demand are like a game between people who want something and people who have it, and that game decides how much things cost.

Imagine you're at a lemonade stand on a hot day. If only a few kids want lemonade, but there’s plenty of lemonade to go around, the person running the stand might lower the price so more kids will buy it. That’s demand, how many people want something, and supply, how much of that thing is available.

If a lot of kids line up for lemonade on a hot day, but there's not enough to go around, the stand might raise the price. That’s because high demand makes prices go up when there's low supply.

On a cool day, maybe only a few kids want lemonade, and the stand has way more than they need. The person running it might lower the price so everyone can buy some, that’s low demand making prices go down when there's high supply.

It’s like a dance between how many people want something and how much of it is available, and that dance decides what we pay for things!