Supply and Demand
📖 Learn
Have you ever wondered why some toys cost more than others? Or why a new video game might be expensive when it first comes out but cheaper a year later? The answer has to do with two powerful forces in economics: supply and demand. These forces work together to determine the prices of almost everything we buy!
What is Demand?
Demand is how much of something people want to buy. When lots of people want to buy a product, we say demand is high. When few people want it, demand is low.
What is Supply?
Supply is how much of something is available to buy. When there's a lot of a product available, we say supply is high. When there's not much available, supply is low.
💡 The Big Idea
Supply and demand work like a seesaw. When they're balanced, prices stay stable. When one side is heavier (more supply or more demand), prices move up or down!
How Supply and Demand Affect Prices
Here's the key rule to remember:
High Demand + Low Supply
When many people want something but there isn't much available...
Low Demand + High Supply
When few people want something but there's lots available...
Demand Goes Up
More people suddenly want to buy something...
Supply Goes Up
More of the product becomes available to buy...
Understanding Supply and Demand Curves
Economists use graphs to show how supply and demand work. Don't worry - they're easier than they look!
⚖️ What is Equilibrium?
The equilibrium point is where supply and demand meet - it's the "perfect" price where sellers want to sell exactly as much as buyers want to buy. At this price, there are no leftovers and no shortages!
Real-World Examples Kids Understand
What is Scarcity?
🔍 Scarcity
Scarcity means there isn't enough of something for everyone who wants it. When something is scarce, supply is low compared to demand - and that usually means higher prices!
- Rare collectible cards are scarce, so they cost more
- Limited edition sneakers are scarce, so resellers charge high prices
- Concert tickets for popular artists become scarce and expensive
💡 Examples
Test your understanding of supply and demand with this interactive challenge! Read each scenario and predict what happens to the price.
A famous YouTuber features a new slime toy in their video. Suddenly, thousands of kids want to buy it!
What will happen to the price of the slime toy?
✏️ Practice
Apply what you've learned about supply and demand to these real-world scenarios.
✅ Check Your Understanding
🛒 Demand
How much of something people want to buy. High demand can push prices up.
📦 Supply
How much of something is available to buy. High supply can push prices down.
⚖️ Equilibrium
The point where supply equals demand - the "perfect" market price.
🔍 Scarcity
When there isn't enough of something for everyone. Scarcity raises prices.
📈 Prices Rise When...
Demand increases OR supply decreases (more want it, less available).
📉 Prices Fall When...
Demand decreases OR supply increases (fewer want it, more available).
🎯 Key Takeaways
- Demand is how much people want to buy something
- Supply is how much of something is available
- When demand is high and supply is low, prices go UP
- When supply is high and demand is low, prices go DOWN
- Equilibrium is where supply and demand are balanced
- Scarcity (limited supply) makes things more expensive
🚀 Next Steps
- Look for examples of supply and demand in your daily life (sales, new products, shortages)
- Think about why some items at the grocery store go on sale
- Notice how prices change during holidays or special events
- Discuss with your family: Why do gas prices go up and down?