| Line 28: |
Line 28: |
| | ==Supply and Demand== | | ==Supply and Demand== |
| | | | |
| − | For any given good or service, there is a supply and demand. The supply consists of quantity and price. The price has enormous influence over the quantity. No company can afford to build cars to sell at a price of only $1. But at a sales price of $30,000, a vast number of cars can be built. The cause is price, and the effect is quantity.
| + | The '''''supply''''' of a good is how much of it, and at what price, is provided by a seller of the good. Grocery stores, factories, malls, amazon.com, and candy stores all '''''supply''''' goods. Services, like entertainment, are supplied by Hollywood, Major League Baseball, the NFL and also doctors, lawyers, accountants, and so on. The supply side is made up of the producers, providers and sellers of goods and services. |
| | | | |
| − | The demand for a good can be described in terms of price and quantity also. At a given price, there is an amount of demand by the public for the good. A billion people might buy a car if the price were only $1. At a much higher price of $30,000, the demand drops to a quantity in the millions range. At a still higher price of $100,000, the demand falls much further to the thousands range. | + | The '''''demand''''' for a good is how much of it, and at what price, is wanted by the public seeking to buy it. Shoppers, moviegoers, baseball and football fans, and people needing medical care are on the demand side. |
| | | | |
| − | Because supply and demand can both be expressed in terms of price and quantity, they can be plotted on the same graph. The y-axis is typically price, and the x-axis is usually quantity. The supply curve is usually upward sloping: the higher the sales price, the higher the quantity that companies can produce for sale. That is because higher sales prices bring in greater revenue to fund the production costs. | + | For any given good or service, there is a supply and demand. The supply can be described in terms of different quantities at different prices. The demand can separately be described as different quantities at different prices. The price has enormous influence over the quantity on both the supply and demand side. |
| | + | |
| | + | No company can afford to build cars (supply them) if the sales price is only $1. But at a sales price of $30,000, a vast number of cars can be built. The cause is price, and the effect is quantity. |
| | + | |
| | + | The demand for a good is also described in terms of price and quantity. At a given price, there is an amount of demand by the public for the good. A billion people might buy a car if the price were only $1. At a much higher price of $30,000, the demand drops to a quantity in the millions range. At a still higher price of $100,000, the demand falls much further to the thousands range. |
| | + | |
| | + | Because supply and demand can both be expressed in terms of price and quantity, they can be plotted on the same graph. In a confusing convention, the y-axis is typically price, and the x-axis is usually quantity. (In most other graphs the cause is placed on the x-axis and the effect is on the y-axis, but you will find that economists often seem to have things backwards!) |
| | + | |
| | + | The supply curve is usually upward sloping: the higher the sales price, the higher the quantity that companies can produce for sale. That is because higher sales prices bring in greater revenue to fund the production costs. |
| | | | |
| | The supply and demand is the most basic relationship in all of economics. It usually looks like this:<ref>The graphs here use Wikipedia open source images.</ref> | | The supply and demand is the most basic relationship in all of economics. It usually looks like this:<ref>The graphs here use Wikipedia open source images.</ref> |