Econ 101: The Basics

Posted: April 29, 2013 by davishipps in Economics

If you’ve ever had the slightest introduction to Economics, you’ve probably heard of Supply and Demand. Simply put, Supply is stuff that’s for sale, and Demand is the buying of that stuff. Said stuff can be physical things (called “goods”) like chewing gum or cars, or it can be work you want done (called “services”) like bookkeeping or computer repair.

The most basic concepts in the study of Economics are the Law of Supply and the Law of Demand. In simplest terms, the Law of Supply says that as the price of a good or service goes up, producers will offer more of it for sale, other things being equal. The Law of Demand says that as the price of a good goes down, buyers are willing to buy more of it, other things being equal. If I were to merge the two, I might phrase it as follows: Sellers generally want to get the highest price possible for the stuff they’re selling, and buyers generally want to pay the lowest price possible for the stuff they’re buying. Eventually the buyers and sellers meet somewhere in the middle to agree on a “price,” which is the point at which each party to the transaction feels like they’re getting more in value than they’re giving up. If there is no such point, no sale/purchase is made.

Pretty simple, right? It makes sense, and you’ve probably experienced both of these laws in your own life, especially if you’ve ever had a yard sale. A case could be made that every aspect of economic activity hinges on these two laws. If you can keep the implications of these laws in mind, you’ll have a firmer grasp on the economic issues of the day than most of the political figures at all levels of government and, sadly, even many professional economists seem to have.

Over the next several posts, I’m going to write about what some of those issues are, and how they relate to Supply and Demand.

*side note*: As someone who is fascinated by the English language, I absolutely love the terminology of the free market economy. It clearly shows who’s in charge. The consumers “demand” certain goods or services be produced. They place “orders” for those goods or services. The producers provide “service” to try to “satisfy the demand.” The consumers are kings and masters; the producers are servants, rewarded (with profits) if the masters are pleased and punished (with losses) if not.

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