Supply and Demand Content from the guide to life, the universe and everything

Supply and Demand

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To truly understand how the economics of this planet functions, one must understand the laws of supply and demand. Please note that some economists claim these to be universal laws, but as we've had no contact with extraterrestrial economies, that claim can be regarded, for the moment, as unfounded.

The laws of supply and demand are explained as follows:

  • The more you want to buy something, assuming a constant supply, the more the price will go up, costing you more dollars, pounds, yen, or whatever.
  • The less customers want to buy something, assuming a constant supply, the more the price will go down, saving you dollars, pounds, yen, and so on.
  • If the supply cannot meet the demand for an item, the price will go up until manufacturers can make enough of the item to meet the demand.
  • If the supply is too great for the demand for an item, the price will go down until the manufacturers can get rid of their inventory and the supply equals the demand.
  • The price of the item meeting the conditions of the previous two explanations is called the 'equilibrium price' - which is what you usually end up paying at the local grocery store.
  • One thing to remember, as soon as you find a way to make a profit on an item (when your costs of production are less than the revenues you receive for the item on the marketplace), someone will try to make that item cheaper and steal your market share.

None of these rules can be applied in the absence of an operating free enterprise system. Unfortunately, just about every government tinkers with its economy enough to ensure that there are no absolutely free enterprise systems anywhere on earth.

Curiously, a true free enterprise system only seems to operate on the black market (drugs, slaves, pornography) But real economists don't hang out in those circles.

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