How does supply and demand influence market prices?

Supply and demand is like a game between kids at a lemonade stand.

Imagine you and your friends are selling lemonade on a hot day. If lots of people want to buy it, that’s demand, but there's not much lemonade around, that’s supply, the price goes up, just like when you charge more because everyone is thirsty.

On the flip side, if only a few kids are buying lemonade and there’s a ton of it sitting on the table, that means supply is high and demand is low, the price goes down, like when you decide to give away free lemonades just to get rid of them all.

Think of your favorite toy. If it's super popular, that’s high demand, but only a few are made, that’s low supply, then the toy costs more, like when you have to wait months for a new version of your favorite game.

But if the toy is not so popular anymore and there are tons of them in stores, that’s low demand and high supply, they might even sell it for less than half price!

So, whenever lots of people want something and not enough is available, prices go up. When few people want it and a lot is around, prices go down. That's how supply and demand work!