SUPPLY AND DEMAND
Created | Updated Mar 15, 2002
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 extraterrestial economies, that claim can be regarded, for the moment, as rubbish.
The laws of supply and demand are explained as follows:
1) 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.
2) The less customers want to buy something, assuming a constant supply, the more the price will go down, saving you dollars, pounds, yen, or whatever.
3) 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.
4) 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.
5) The price of the item meeting the conditions at the end of explanation four and five is called the "equilibrium price" for an item - which is what you usually end up paying at the local grocery.
6) None of these laws can be applied in the absence of a free enterprise system - which is just about anywhere on earth.
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. This also is only applicable in a free enterprise system, of which there are virtually none on earth.
Curiously, a true free enterprise system only seems to operate on the black market (drugs, slaves, pornography, etc.)