Supply and Demand

Supply and demand is the measure of the balance between the quantity of goods intended to be produced with the resulting rate of consumption or vice versa. It tells you how many more monkeys from the jungle are needed to be caught to quell angry customers who want to buy them as pets. Supply and Demand are driven by market forces or a group of people buying or selling a particular good. Supply is created by producers or sellers while demand is determined by buyers.

Supply and demand refers to people's intent to produce or buy something not by how many has been sold by suppliers or bought by the demanders or buyers. If you put it that way, quantity sold or purchased may not equal supply and demand. For example, you have an electronics store and a new hot gadget is out in the market. You heard that it's in high demand right now so you bought as many of that gadget as possible to ride that fad. After a week of sales your inventory is out and you sold all 500 of that thing, that is not demand were talking about this is your revenue. The demand were talking about is say, 50% of the entire population of the United States (150 million) at the current price of $200. When the price of that gadget dropped to $180 within a month then the demand might increase to 70% of the entire population of the United States. Since more people intend to buy that item at its now much lower price, it doesn't mean that some would actually end up buying it so that the quantity sold equals the quantity demanded.

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