The Role of Supply and Demand in the Economy from "summary" of Economics in One Lesson by Henry Hazlitt
Supply and demand play a crucial role in the economy. They are like two blades of a pair of scissors - they work together to determine prices and quantities in the market. When the supply of a good or service increases, assuming demand remains the same, the price tends to fall. On the other hand, when the supply decreases, prices tend to rise. This is the law of supply. Similarly, the law of demand states that when the demand for a good or service increases, assuming supply remains constant, prices tend to rise. Conversely, when demand decreases, prices tend to fall. These two laws work in tandem to ensure that the market reaches equilibrium, where the quantity supplied equals the quantity demanded at a certain price. The market is like a giant auction where buyers and sellers come together to determine prices. Prices serve as signals that convey information about the scarcity of a particular good or service. If a good is in...
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