I have been in discussion with a lot of people today about the potential fall out from the Lehman Brothers spectacular bankruptcy filing in New York. The Dow Jones fell 504 points overnight and the ASX is now down substantially for the day – approximately 120 points when I last checked. With all the other [...]

Now you have a good understand of how supply and demand work separately – but the crucial knowledge is understanding how these two economic features work together.
If we refer back to the scarcity concept – the more scarce a good or service is at any particular time, the more you have to [...]

Supply is the relationship between the total amount of goods or services available for purchase, in comparison to the price that people are willing-to-pay for it. Supply attempts to match demand, so that as consumer’s willingness-to-pay increases, the goods and services supplied will increase to capitalize on this strengthening price. This implies [...]

Demand refers to the relationship between the quantity of a good or service against the price that was paid for it. The quantity demanded is the amount of a particular good or service people want, and how much they are willing to pay for it. It is essentially just a willingness-to-pay [...]

To have a more complete economic understanding, you must recognize the fundamental basics behind the economy. Arguably the most important theory in economics is the theory of supply and demand which is fairly easy to comprehend when you relate it back to your normal life. Think about all the goods and [...]