Law of supply and demand, how does it work?
By junivat
@junivat (49)
November 26, 2011 4:45am CST
law of supply and demand was taught in economics subject back in high school.
i didn't care to learn the complete details of this,
upon researching its something about if there is a need of supply price goes up.
if there are too much supply price goes down.
but what i don't understand is why you have to increase when you can leave it stable..
please share your thoughts to enlighten me and maybe you.
2 responses
@mythociate (21432)
• Oklahoma City, Oklahoma
22 Jul 12
I think of the Tulip Rule. Some people came from Denmark where tulips are everywhere for free, and they have a steady supply of tulips from there. And they sold `em for one cent apiece.
Someone saw this, figured 'If I buy it for 1, I can sell it for 2 (as it's in such DEMAND),' and made money off of it. Someone else saw them, figured 'If I buy it for 2, I can sell it for 4 ..."
And so on, until people were selling them for $10-$15 apiece. Around that time, demand fell.
It's basically science-laws about 'how bad people want something.'
@owlwings (43910)
• Cambridge, England
26 Nov 11
It's really very simple. If you have a free market where each supplier can charge what price he wants, then, if there is plenty of supply, someone will charge less than the others and will sell more until someone undercuts him (provided that there are plenty of customers ... 'demand'.
If something is in short supply, then there are fewer items to be sold than there are customers and people can charge more for the same thing.
It's all a balance between how much the customer will pay for something he wants or needs and how much the supplier can charge in relation to what other suppliers are charging in order to sell anything at all.
