Introduction to entrepreneurship/IENT103/Economics/Supply

The 'Law of Supply and Demand', or simply Supply and Demand is a world-recognised economic model which determines the price any item will sell at.

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?

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