Supply and demand are really important ideas in economics. They help us understand how markets work. Let’s go over the main points:

1. Law of Demand

• What It Means: When the price of something goes down, people want to buy more of it. If the price goes up, they want less.
• How People Act: Usually, people buy more when prices are lower. For example, if your favorite pizza is on sale, you’ll want to buy more slices, right?

2. Law of Supply

• What It Means: When the price of a product goes up, producers make more of it. When the price goes down, they make less.
• How Producers Act: Imagine a bakery that can sell cupcakes for $5 each instead of$3. They will likely bake more cupcakes to take advantage of the higher price.

3. Equilibrium

• Market Equilibrium: This is the point where supply equals demand. At this point, everything is balanced. There are enough products for everyone who wants to buy them.
• Example: If a store has 100 shoes and sells all of them at $40 each, that’s a stable price.

4. Shifts in Supply and Demand

• What Can Change: Sometimes, things like what people like, new technology, or events (like a pandemic) can change supply or demand.
• Effect on Prices: If suddenly, a lot of people want a new gadget, the price might go up quickly, creating a new balance in the market.

These ideas help us understand why prices go up and down and give us clues about what might happen in the market.