Supply and Demand is something that affects the price that products and services sell for.

So, there are three terms you need to understand here:

  1. Supply, is the amount of a product or service that the seller has.
  2. Demand, is the amount of people willing to pay for that product or service.
  3. And price, is the amount of money the seller can charge.

So if the seller has lots of a product to sell, but not a lot of people wanted it, then he couldn’t sell it for a lot of money.

On the other hand, if the seller didn’t have a lot of the product, but lots of people really wanted it, then he could sell it for much more money.

Let’s look at an example.

Say you had 10 ice blocks, and 5 people wanted them, then the supply would be more than the demand, so you wouldn’t be able to sell them for very much.

But if 20 people wanted ice blocks, then the demand is much higher than the supply. This means not everyone could have an ice block, so the people who really want ice blocks will pay a higher price.