UNDERSTANDING ECONOMICS: SUPPLY AND DEMAND.wmv

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Text From Vid:
Supply and demand. Supply and demand are the two most important terms in economics. A thorough and solid understanding of these terms is crucial for understanding the markets, economics, and some government policies.
So, lets go.
Demand: Demand are the buyers. Or, more specifically, demand is the desire and capability of people to purchase things.
Supply: Supply are the sellers. Or, more specifically, supply is desire and capability of sellers to make things available for purchase.
Once supply increases, when theres more things for sale, prices will decline until it is low enough to attract more buyers to offset the increase in supply.
When demand increases, prices will begin to rise, until theyve risen high enough to attract more sellers to offset the increase in demand.
The Law of Demand: The Law of Demand states that, as the price of an item goes up, and everything else stays the same, the quantity demanded by buyers will go down.
As the price of an item goes down in price, and everything else stays the same, the quantity demanded by buyers will go up.
In other words, people will buy more of something if the price is lower than they will buy if the price is higher.
The Law of Supply: The Law of Supply states that as the price of an item goes up, and everything else stays the same, the amount people are willing to sell will go up.
It also states that, as prices of an item go down, the amount people are willing to sell will go down.
Its just common sense that people will sell more of something if prices are higher and theyre going to be getting more for it than they will sell if the prices are lower and they are getting less for it.
As prices rise, more and more sellers will begin to sell and more and more buyers will stop buying until a balance is reached.
As prices drop, more and more buyers will begin to buy, and more and more sellers will stop selling until a balance is reached.
That balance, the price at which the quantity demanded is exactly equal to the quantity supplied, is known as the equilibrium price.
So, lets look at an example involving wheat being sold by the bushel.
Looking at the supply side, at $5 a bushel, farmers are only willing to supply 100,000 bushels of wheat. However, if the price were $6, farmers are willing to supply 200,000 bushels of wheat.
At $7, theyre willing to supply 300,000, all the way up to $9, where theyre willing to supply half a million bushels of wheat.
And that just is common sense, that people would sell more of something if theyre getting more money for it.
Over on the demand side, if the price per bushel is $5 per bushel of wheat, buyers will buy 500,000 bushels worth.
However, if the price is $7 per bushel, buyers will only buy 300,000 bushels.
All the way to where if the price is $9 a bushel, buyers will only buy 100,000 bushels of wheat.
Which just makes sense, that people will buy more of something when its cheaper and on sale than they will when its really expensive.
Putting the two sides together, we can see that the equilibrium price for wheat, at this particular time, is $7 per bushel.
If the price were to rise above or below $7 per bushel, there would either be a shortage of buyers or a shortage of sellers.
As the price rises above $7, more people start selling their wheat. There is more wheat for sale, yet the higher prices also mean that less people are willing to buy it.
This means that sellers must reduce prices back down to either attract new buyers or to get existing buyers to purchase more.
As the price drops below $7 per bushel, less people are now willing to sell their wheat. Yet the cheaper prices mean that more people now want to buy it.
This means that buyers are now competing with each other for the available supply, which causes prices to rise back up.
Price will move until supply and demand are balanced.
If the price is above $7 for wheat, a surplus will exist. There will be more wheat for sale than people want to buy....

Music by:
Danse Macabre - Low Strings Finale (Theme)
Exotic Battle
Machinations
Plans In Motion
Kevin MacLeod @ incompetech.com

Category:

Education

Tags:

• Forex
• currency
• fundamentals
• economics
• trading
• pips
• free
• supply and demand
• fiscal
• monetary
• inflation
• gdp
• stocks
• fundamental
• informedtrades
• fed
• federal
• reserve
• bank
• current
• capital
• bop
• balance of payments
• theory
• asset market
• purchase power parity
• interest rates

[kenav88]

Great presentation...

[powellbrandon90]

thanks for the tips about demands and supply

[123gery09]

really very good presentation , i was always baffled byecomonics,now geetin some clarity , thanks man

[Runrome]

Good video thanks for the education.

Where is part 1 ?

[jadenephrite]

This is a very good video because it is easy to understand and practical in its appication.

[guruadisankara]

@DavidAKZ Speculation starts from birth. Supply and demand ends with death.

[svca12218]

Nice Econ 101 video, Thanks!

[tekmnd]

Thanks kosai :)

Maybe they didn't realize these are my vids

[kosai19]

@tekmnd

Not sure why people gave that comment a thumbs down. Been trading 5 years now and the comment is absolutely accurate.

Trading is 1 person versus the other. Why would it be easy and obvious how to differentiate between speculation and genuine supply/demand. By it's very nature it will change each instance.

Would a football team give the opposing team it's playbook? Of course not. So why would anyone buying or selling want others to know their full positions? They must hide it.

[tekmnd]

Hi DavidAKZ. As you will see when I post the vids on economic theory, there is no one right answer, and a lot of different opinions on when that happens.