What causes economic bubbles, and why do they burst?

Economic bubbles happen when people get really excited about something and keep buying it, even if it's not actually worth that much.

Imagine you have a piggy bank full of candy bars. At first, everyone thinks the candy bars are just normal. But then, one day, someone says, “Hey, these candy bars are super special!” Suddenly, everyone wants to buy them. They don’t even care if they’re just regular candy, they think they’ll be worth a lot more later.

That’s like an economic bubble: people keep buying something because they believe it will get even more valuable soon. But sometimes, that belief isn’t based on real value.

Eventually, the piggy bank gets full of candy bars, but there's not enough room for everyone. Some people have to stop buying, and others start selling. When too many people sell at once, the price drops quickly.

It’s like when you’re playing a game of hot potato, everyone is passing it around excitedly, but as soon as someone drops it, the music stops, and everything gets messy.

That’s what happens in an economic bubble: too much excitement, then a sudden drop, and boom, it bursts!