Introduction to entrepreneurship/IENT103/Economics/Supply
To understand the model, we should first think about 'Supply', and then consider 'Demand'; before putting the two concepts together.
In simple terms:
- Supply is the amount of something that providers are willing to bring to the market (i.e. supply) at a given price.
- Demand is the amount of something that consumers want to buy (or demand) at a given price. 
So what is Supply and Demand? This is an economic model where the price at which a good (a product or service) is sold is controlled by the good’s level of supply, and its demand. If the supply of a good is equal to its demand, there is an economic equilibrium, and the good is sold at a stable price which buyers and sellers are happy with.
However, Supply and Demand can (and often does) fluctuate. When the supply of a good is greater than the demand for that good, there is a surplus. On the other hand, when demand for a good is greater than the supply, then there is a shortage. In January 2017, for instance, there was a shortage of courgettes in the UK due to bad weather across Europe . This resulted in either no supply available to many supermarkets or, where supply was possible, the price rose from £6 or £7 per box to £20 per box. In another example, at the end of 2018, house prices in New Zealand were forecast to jump to record highs because of a housing shortage (with demand greater than supply). By contrast, fishermen (and women) in Northern Australia experienced a sharp drop in the price of barramundi fish in 2018, due to a surplus caused by farmed and imported fish entering the market to compete with their local wild-caught fish. This may have been wonderful for customers, but think about the impact on the sellers!
Can you think of any examples of shortages or surpluses in your region?