Understanding supply and demand is super important for knowing how markets work. Let's break it down simply:

• Supply: This is about how much of a product businesses are ready to sell at different prices. When prices go up, businesses usually make more of that product. Makes sense, right?

• Demand: This is how much people want to buy a product at different prices. When prices go down, people often want to buy more.

Now, let’s talk about a shortage. This happens when demand is higher than supply at a certain price. For instance, if a brand-new gaming console comes out, lots of people want to buy it, but there aren't enough available. This can frustrate people, and they might even pay more to get one.

On the other side, we have a surplus. This is when there are more products available than people want to buy. If a store has too many gaming consoles, they might lower the price to sell them more easily.

So, keeping a balance between supply and demand is really important for businesses. It helps them make money and keeps customers happy!