One of the most basic principals to wrap your head around when it comes to economics is the principal of demand and supply. Two Terms:
- Supply: The amount of your product or service that you have to hand at any given moment
- Demand: The public want for you good or service.
That’s not to hard to grasp is it? So if the Demand for something is high, the supply will be low and vice versa, or at least in theory.
There are a number of factors that can effect either supply or demand, these can be political, economic, social, technological, environmental or legislative.
For an example, I will use cocaine to highlight my point. Cocaine is a highly addictive substance. So therefore it perfectly demonstrates how demand effects supply and supply effects demand. It also has the benefit of being something that will be effected both politically and legislatively (the war on drugs has been a political and legal position for decades) however, with social morals being what they are today, and thanks to technological advances in farming and distribution, use has become more widespread, However that being said, if the economy were to collapse the demand would likely increase, and likely if some environmental catastrophe (flood, famine, forest fire, earthquake etc) befell Central America (the largest centre of cocaine development) it would mean that supply would fall and so prices would rise with demand.
Ideally as a consumer you want to be in a position where there is a plentiful supply of whatever product you are after, enough to keep demand satisfied, but where there isn’t enough of a demand for prices to sky rocket. This is called the equilibrium point.
But you may also find yourself in that awkward where there is no longer a demand (or a minimal one i.e Just You) but also no supply either.