How does supply and demand work?

Can you explain how supply and demand work in economics?

Sure! Supply and demand are fundamental concepts that describe how prices are determined in a market. Supply refers to how much of a good or service is available, while demand refers to how much of it consumers want.

What happens when demand exceeds supply?

When demand exceeds supply, prices tend to rise. This is because consumers are willing to pay more to obtain the limited goods available.

And what about when supply exceeds demand?

When supply exceeds demand, prices usually fall. Sellers may lower prices to attract buyers and clear their excess inventory.

Can you give me a real-world example of this?

Absolutely! A classic example is the housing market. If there are more houses for sale than buyers, prices will drop. Conversely, if there are more buyers than available houses, prices will increase.