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How Do Supply and Demand Determine Market Prices and Economic Health?

Supply and demand are important ideas that help explain why prices change in the market.

  • Supply is about how much of a product is available for people to buy.
  • Demand is about how much people want to buy that product.

When more people want something and there isn’t much of it available, prices usually go up.

For example, think about ice cream on a really hot summer day. Everyone wants ice cream, so the price might go up.

On the other hand, if there are too many products available and not enough people want them, prices can go down.

Like when a new smartphone comes out, the older model often gets cheaper because there are lots of them left in stock.

This back-and-forth between supply and demand shows how healthy the economy is. It affects things like how much is made and how many people have jobs.

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How Do Supply and Demand Determine Market Prices and Economic Health?

Supply and demand are important ideas that help explain why prices change in the market.

  • Supply is about how much of a product is available for people to buy.
  • Demand is about how much people want to buy that product.

When more people want something and there isn’t much of it available, prices usually go up.

For example, think about ice cream on a really hot summer day. Everyone wants ice cream, so the price might go up.

On the other hand, if there are too many products available and not enough people want them, prices can go down.

Like when a new smartphone comes out, the older model often gets cheaper because there are lots of them left in stock.

This back-and-forth between supply and demand shows how healthy the economy is. It affects things like how much is made and how many people have jobs.

Related articles