External events have a big impact on how the market works, especially when it comes to supply and demand. Let’s explain this in simpler terms.
Market equilibrium happens when the amount of a product that people want to buy is the same as what producers are willing to sell. At this point, prices become steady.
External events can change either supply or demand, which affects prices and market equilibrium. Here are some examples:
Natural Disasters: Think about a hurricane hitting a place where oranges are farmed. This disaster can damage the orange crops, which means less oranges are available. With fewer oranges to sell, prices go up, and people might buy fewer oranges. This creates a new balance in the market.
Technological Advances: On the other hand, if a new technology makes it easier and cheaper to make electric cars, then more cars will be produced. This means prices can drop, and more people will want to buy cars. This also leads to a new balance, but at a lower price.
Trends can also change what people want to buy. For example, let’s say healthy eating suddenly becomes super popular. If kale becomes the trendy food, then more people want to buy it. The demand for kale goes up, which pushes prices higher until the market finds a new balance.
In short, outside events like natural disasters, new technology, and popular trends can shake up the market. These changes can lead to different prices and amounts of products available for people to buy.
External events have a big impact on how the market works, especially when it comes to supply and demand. Let’s explain this in simpler terms.
Market equilibrium happens when the amount of a product that people want to buy is the same as what producers are willing to sell. At this point, prices become steady.
External events can change either supply or demand, which affects prices and market equilibrium. Here are some examples:
Natural Disasters: Think about a hurricane hitting a place where oranges are farmed. This disaster can damage the orange crops, which means less oranges are available. With fewer oranges to sell, prices go up, and people might buy fewer oranges. This creates a new balance in the market.
Technological Advances: On the other hand, if a new technology makes it easier and cheaper to make electric cars, then more cars will be produced. This means prices can drop, and more people will want to buy cars. This also leads to a new balance, but at a lower price.
Trends can also change what people want to buy. For example, let’s say healthy eating suddenly becomes super popular. If kale becomes the trendy food, then more people want to buy it. The demand for kale goes up, which pushes prices higher until the market finds a new balance.
In short, outside events like natural disasters, new technology, and popular trends can shake up the market. These changes can lead to different prices and amounts of products available for people to buy.