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The Most Important Law

The Most Important Law

As my oldest was about to take her first economics class two years ago, I jokingly told her all “…she would need to know to get a good grade in the class.”  She played along and said “What’s that Dad?” I’m sure she was waiting for a parental lecture. But instead I told her about the basic four laws of supply and demand according to Wikipedia:

  • If demand increases and supply remains unchanged, a shortage occurs, leading to higher prices.
  • If demand decreases and supply remains unchanged, a surplus occurs, leading to lower prices.
  • If demand remains unchanged and supply increases, a surplus occurs, leading to lower prices.
  • If demand remains unchanged and supply decreases, a shortage occurs, leading to higher prices.

Possibly a good example of the second basic law above is the end of season sales on clothing.  Or how about buying reduced price bread from the grocery store two days before the expiration?  See you probably have experienced many examples of the law of supply and demand.

The law of supply and demand…the most important law.  Know it and use it to your financial advantage or ignore it at your own peril.

I hope this information helps you make smart choices about your money.