I. Foundations of Money
Prices reflect how the economy allocates value. They are not random; they’re shaped by three main forces: supply, demand, and competition.
Supply is the amount of a good or service available.
When supply increases, prices tend to fall.
When supply decreases, prices tend to rise.
Demand is how much people want to buy something.
When demand rises, prices tend to go up.
When demand falls, prices tend to go down.
Competition is the number of options available.
More competition usually lowers prices.
Less competition often raises them.
In most markets, all three forces act at the same time. A product’s final price reflects their balance.
Costs also matter. Businesses must cover materials, labor, shipping, rent, and overhead. When these costs rise, prices often rise as well.
Technology can lower prices by making production more efficient, especially in electronics and online services.
Prices change because supply shifts, demand shifts, costs move, or competition changes. Understanding these forces helps people make better decisions as consumers, workers, and future investors.