Supply+and+Demand

=Chapter 3 - Supply and Demand=

At the Spice Girls concerts last year T-Shirts of the band (which probably cost less than $1 to make in some foreign sweat shop) sold for about $50.00. Was this price excessive? It doesn't matter. All we care about as economics is to understand how that price was reached.
 * E-LECTURE**
 * Warning** - This is the most important concept in the course. If you do not grasp this with adequate proficiency, your chances of passing the course will be extraordinarily slim. Make sure you see me for help if/when you need it.**

The answer lies in Supply and Demand. Not one. Both. Unfortunately, the concepts are truly best understood by starting with working with each of them alone and them combining them to see the effects these two forces have on one another.

Demand is more than just desire. There are a great many things we desire in life. Money. Power. Cars. Houses. Hair. However, does it really matter if I want to have a private jet? Is that something that is reasonable and worth paying attention to? The answer is no.

Demand is our **Desire, Willingness and Ability** to purchase an item at **a specific price and quantity.** So, though I may have the desire to buy a private jet, without the ability to do so ($$$) and/or the willingness to part with my money at a specific price then I will not have demand.

Likewise, Supply is the **Desire, Willingness and Ability** to produce and sell a product at **a specific price and quantity.** Customers may decide what things they wish to buy but unless business are willing to produce them it isn't likely that it will ever be made.

Consumers, those who have Demand, are far more likely to demand **higher quantities** of a good at lower prices. Think about it, if you can get a Lamborghini for $15.99 wouldn't you be likely to get more than one? Wouldn't there be more people willing to pay that price than were willing to pay the previous price tag of $2.5 million.

Producers, those who Supply products, are far more likely to offer more quantities of a product for sale if the product has a higher price tag. If you could sell bottled water for $5.00 instead of $1.00, wouldn't you?

Obviously, these forces must interact in some way to determine what the actual price of a product would be.

Questions: 1. List three examples of how Supply and Demanded has affected you in the past 48 hours. 2. Why do bottles of water generally sell for around $1.00? 3. If we assume that business want to sell peanuts for 4$ and consumers want them for free, how will we decide how much to charge?