One of the basic concepts of our system of economics is that of supply and demand.
NOTE: You have 4 cars and 4 people
The factory represents the manufacturer or supplier, the cars represent the number of products available, and the people represent the demand.
NOTE 1: The manufacturer can supply ONLY one car. There are 4 people who want to buy the car, so the demand is greater than the supply, and the price of the car will be HIGH.
NOTE 2: The manufacturer can supply enough cars for all 4 who want to buy them. The price of each car should DROP from the previous situation, but the manufacturer will still make a profit. When the SUPPLY and DEMAND are equal, the market is stable.
NOTE 3: Other manufacturers have started making cars, and now there is a greater supply than demand. The price of cars will DROP, and some manufacturers will stop making them because profits will be too low. When this happens, the market will again stabilize, because supply equals demand.
Understanding supply and demand aids everyone when thinking of purchasing a car, home, boat, etc. Most people end up paying a high price due to failure or understanding how supply demand works.
There are many ways to discover if supply is greater or lesser than demand when thinking of purchasing large items.
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