GED Economics
Here’s something I bet will be on the GED test: supply and demand. That’s because the GED social studies test isn’t just about history… it’s got charts and graphs and stuff about economics (money!) and geography (maps!). So you need to know a little bit about those things. It’s not really hard… here’s an article about it, with some good charts:
http://www.investopedia.com/university/economics/economics3.asp
The Basics
- As the price goes up, demand goes down.
The cheaper something is, the more people want it. The more it costs, the less people want it. Right? If something’s only a buck, you’re more likely to buy it than if it’s 10 bucks. That’s easy. More people will buy an item if it’s cheap.
- As the price goes up, supply goes up.
The more something will sell for, the more the businesses want to sell. Right? They want to make as much money as possible. So, if something will sell for $100,000, they want to sell LOTS. (Wouldn’t you?) If it only sells for a buck… well, they just don’t care as much.
- As the price goes up, demand goes down, but supply goes up.
I’m just putting this all together… When you show the supply and demand ideas together on a graph, they go in opposite directions. As price goes up, more sellers want to sell, but fewer buyers want to buy.
The buyers want a cheap price, and the sellers want an expensive price. That’s just human nature, right? If the price is too high, there will be more sellers and less buyers, so the sellers can’t sell all their stuff. If the price is too low, there’ll be more buyers and less sellers, so the sellers will run out.
- Supply and demand meet in the middle… at “equilibrium.”
If you look at a supply and demand chart, the two lines cross in the middle. That point is called “equilibium.” Maybe because supply and demand are the same–equal. That’s the point where there are exactly the same amount of buyers and sellers at a certain price. The idea is, because of how much people value an item, the price will end up at the equilibrium point, and all the items will get sold.
Of course, real life isn’t always perfect like that. It’s oversimplified… but prices do tend to work this way. So, what do you think? Next time, I’ll come up with a practice question about supply and demand.
