Supply and demand determine prices from "summary" of The Economic Naturalist by Robert H. Frank
When you walk into a store and see that the price of a product has gone up, you can be pretty sure that it's because more people want to buy it than the store has available for sale. Conversely, if you see a price that's lower than you expected, it's probably because the store has more of the product than it can sell. This is the simple but powerful idea that underlies the concept of supply and demand. Supply and demand are the two forces that determine prices in a market economy. When demand for a product is high, but the supply is limited, prices will rise. This is because sellers can charge more for a product that is in high demand. On the other hand, when demand is low and supply is high, prices will fall. Sellers will ...
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