This will help you understand how Supply and Demand works.

Determining Prices

Prices are determined by how much is selling. If there is a shortage in the item your looking for then when you find it the price is going to be higher then if you bought it when there was an aubundance. As more are produced and they don’t sell prices drop and eventually a sale will be put on to try to get rid of the remaining amount left. When this happens and prices drop you can increase prices in two ways.

1st- Stop producing the product, this will intentially create a shortage making prices go up so you get paid more if the price is still low enough that people are willing to buy it.

2nd- Lower Prices, lowering prices will get more people to buy your product then were originally planning. Then you sit back and hope they talk about how good your product was, through word of mouth your going to slowly get more sales and hopefully increase prices.

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Both these are temporary ways to put an item thats almost at the end of it’s life back into the spot light for a limited time. These will not keep an item flowing through the market so eventually you’ll have to give up and put out something new. All major companies do this when they come out with new products. You can buy an XP now for a dime but you can’t get a good Vista loaded computer for the same prices. It’s not that it cost more to put Vista on the computer but more of people want it more now since all the kinks are out so they can afford to charge more to put it on a computer so the company selling it to you has to charge more to make a profit.

The Effects On Our Economy

Supply & Demand has a huge effect on our economy and visa versa. Supply and Demand can make or break our economy because of what we choose to do.

Supply & Demand-

When the demand goes up more money transfers hands increasing the GPD of Our Economy.

When the demad goes down the prices become cheaper because they are trying to get rid of the excess product that they have.

OverView

If we spend smart then the economy will do fine. It’s a balance that we need, if you spend to much and end up behind and in debt then you hurt the economy but if you spend extra cash and can still pay bills then your doing your share of trying to get and keep the economy at its peak.