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Supply and demand
Wirtschaftab 9 J.
The basic principle of the market economy: when many people want something (high demand) but there is little of it (scarce supply), the price rises. And vice versa.
Supply and demand is the most important principle in economics. It explains why things cost what they cost:
High demand + low supply = high price. Example: if everyone wants a particular ice cream in summer but the manufacturer only produces a little, the price rises.
Low demand + high supply = low price. Example: after Christmas nobody wants to buy Christmas decorations any more – prices drop to 50–70% off.
This principle applies to everything: food, housing, shares, labour and even bitcoins.
Did you know? The principle was described by Adam Smith in 1776 and has been the foundation of the market economy for more than 250 years – still valid today.
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