Supply and demand is like when you and your friends decide how much candy to buy at the store.
Supply is how many candies are available, think of it as the number of sweets the shop has on the shelf. Demand is how many people want to buy those candies, imagine all your friends rushing in to grab them.
When there's lots of candy and not many friends
If the store has a ton of candy (high supply) but only a few kids come in (low demand), the shopkeeper might lower the price. It’s like when you have too much of something and want to share it, you’ll give it away for less.
When there's little candy and lots of friends
But if the store has just a few candies (low supply) and all your friends come in at once (high demand), the shopkeeper can raise the price. It’s like when everyone wants the last piece of cake, you’ll pay more to get it.
It’s not magic, it’s just people making choices every day, based on what they have and what they want.
Examples
- A bakery makes 100 loaves of bread every day. If more people want to buy bread, the price goes up.
- When there are many farmers growing apples, the price of apples tends to be lower.
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See also
- How do supply and demand affect market prices?
- What are the laws of supply and demand?
- How Does Supply and Demand in 8 Minutes Work?
- How Does Increase and Decrease in Supply Work?
- How Does 3 Supply and Demand Shocks Work?