Supply and Demand

Supply and demand describe market relations between prospective sellers and buyers of a good. Supply and demand in reality, determine the prices that consumers pay for goods. Basically stated, if a good is in high demand, the price will go up. If the demand for a good is in low demand, the price is expected to fall. Economist measures these activities, more often than not with a graph or chart. The in of this chart is called either the supply curve, or the demand curve. A very important concept in understanding supply and demand is to understand elasticity. In this context, it refers to how supply and demand respond to various factors.

In this situation, where a gas pipeline breaks, it causes consumer panic. In a situation such as consumer panic, it is more often than not, a situation where the demand goes way up, and the supply falls way under. Consumers will look to stock up on the gas, so as to avoid being out of gas. This will in turn make the available supply low. As the supply becomes lower, the prices of the gas will increase. Another factor to consider is the unfair practice of price gouging. Some retailers may take advantage of a situation, and make things even more difficult for the stressed consumer.

Gas affects many other prices as well. With all things considered, it is probable that prices of food and other necessities will go up. This is due to the fact that, distributors who drive trucks, will have to raise their prices that charge stores and restaurants to deliver food. The stores and restaurants will most likely increase the prices that they charge for food to their consumers.

In this situation, there is a shift in both the supply curve and the demand curve. The supply of the gas was restricted, so the supply was lower. As the supply was lower, the supply curve shifted to the right. The supply curve shifted to right, because of in part, the consumer panic; more consumers were buying more gas, and depleting the gas supply. This purchasing of gas in a panic as well results in a change in the supply curve. When consumers buy more, the demand curve shifts to the right... In this situation both the supply curve and the demand curve shifted to the right.

Prices of items often act as signals to buyers and sellers. One of the things that prices do is carry information to buyers and sellers. When prices are low enough, they send a "buy" signal to buyers, who can now afford more of the things they want. When prices are high enough, they send a "sell"