How Do You Understand Supply And Demand?
• Check your assumptions. The laws of supply and demand are easier to understand if you consider commodity goods like lumber, crude oil or concrete. A commodity is a good that is perceived to be worth the same amount regardless of the supplier. • Pretend that you are a consumer. This is easy because you are a consumer. Let’s say that you buy 7 apples a week at a price of fifty cents per apple. If the price of those apples goes up to one dollar per apple, will you buy more or less apples? When the price of a good rises, the demand for that good decreases and when the price falls, the demand for that good increases. This is the law of demand. • Pretend that you are a supplier. This may be more difficult to do. Let’s say that you own a farm and you sell apples along with other fruits. One day, you sell your apples at the farmer’s market for fifty cents per apple and sell out. The next day you sell your apples for a dollar a piece and you run out of apples again. Now you are making twice a
