Why Do Prices Sometimes Just... Explode?

Imagine a lemonade stand in the middle of summer. If everyone suddenly wants to buy lemonade, but there's not enough lemons or sugar, prices go up because people are willing to pay more for it. This is like a price explosion, when too many people want something and there isn't enough of it around.

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Examples

  1. You want the last slice of pizza at the party, so you pay double what it normally costs.
  2. All your classmates want to buy the same game at the store, and they raise the price.
  3. Your favorite candy goes from $2 a bag to $5 overnight.

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