Supply is the amount of a product that businesses are able to offer for sale.  Usually, the higher the price, the greater the amount supplied.  Demand for a product is the amount of it that people buy. Usually, if there are high prices not many people will want the item (low demand). What works best is when producers sell the same amount that everyone wants.  Then supply equals demand and everyone is happy.  That is called equilibrium price.  But if a lot of people want a certain item and there is a limited supply of that item, the price skyrockets. But, then, if nobody wants a certain item, there is plenty of it and the price drops. That is how the law of supply and demand works.  

For example, the Sony Playstation 2 demand was so high that stores ran out of them. But that didn't stop shoppers from buying them. Lots of people sold them over the Internet for thousands of dollars and people paid it. They paid it because they wanted it and there was a limited supply.

Another example is shortstop baseball player Alex Rodriguez. He gets paid 25 million dollars a year because there are not many good shortstop players.

Also, if you trade collectable cards, you know that in order to get a rare card, you are probably going to have to trade more than one card to get that rare card, because they are hard to find. 

All of these are examples of supply and demand. When demand is high and the supply is low the price will go up. This is one of the principles that our economy is based on.

Citations

Books

O'Hara, Terence.  The Economy. Chelsea House Publishers, Philadelphia: 2002.

Electronic Media

Aaron, Henry J.. "Supply and Demand." World Book Online Reference Center. 2004. World Book, Inc. <http://www.worldbookonline.com/wb/Article?id=ar540420.> (February, 2004).

Images

Images of baseball player from "Microsoft Office Online" <http://office.microsoft.com/clipart/default.aspx?cag=1> Images free for non-profit and personal use. (October-February, 2003-2004). 

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