Supply and demand

Can you picture it. A bright, sunny day, a wobbly table, and a big sign that says ‘LEMONADE 50 CENTS’. You have three full pitchers of your delicious, ice-cold lemonade, but almost no one is walking by. A few people wave, but they aren’t thirsty. The ice cubes are melting, and you start to worry. To sell any at all, you might have to change your sign to say 25 cents. You have lots of lemonade, but not a lot of thirsty customers. Now, let’s flip the story. Imagine it’s the hottest day of the year. A big soccer game just finished at the park next door, and a whole dusty, sweaty team is heading your way. Everyone is fanning themselves and talking about how thirsty they are. You look down and see you only have one pitcher left. Suddenly, your lemonade is the most popular drink in the whole world. I am the invisible force in these moments, the secret whisper that helps you decide what your lemonade is worth. I'm a balancing act, a push and a pull that you can feel in every market, store, and playground trade, even before you know my name.

Hello. My name is Supply and Demand. I know it sounds like a mouthful, but I'm really just two simple ideas that work together like best friends. My friend Supply is all about how much of something there is. Think of that lemonade. When you had three full pitchers, you had a very big supply. My other friend, Demand, is all about how many people want that thing. When the thirsty soccer team showed up, the demand for your lemonade was huge. I work by balancing my two friends. If the supply is low (only one pitcher of lemonade) but the demand is high (a whole thirsty team), the price goes up because the lemonade is rare and very wanted. But if the supply is huge (three pitchers) and the demand is low (no one is thirsty), the price has to go down to convince people to buy it. I’ve been around for a very long time, helping people in ancient markets trade shells for fish and farmers trade wheat for tools. But a very clever man named Adam Smith officially introduced me to the world. On March 9th, 1776, he published a famous book called ‘The Wealth of Nations,’ where he wrote down all my rules and explained how I work. He helped everyone understand the secret conversation I was having all over the world.

Today, I'm everywhere, and I’m busier than ever. I help farmers decide how many strawberries to grow for the summer festivals. If they grow too many, the price will be low. If they don’t grow enough, the price will be very high. I help movie theaters figure out why they can charge more for a ticket to a popular new movie on a Saturday night than for an old movie on a Tuesday afternoon. I even help your favorite video game creators decide when to release a new, special item inside the game. I’m not just about money, though. I am a giant, quiet conversation between the people who make things and the people who need them. When you see a price tag, you're really seeing a message about how much of something is available and how much it is wanted. By helping everyone see what is needed and valued, I help communities work together, share fairly, and make sure everyone has a chance to get what they need.