The Nature of The Beast: Supply and Demand

Day 1,247, 21:53 • Published in Canada Canada • by Bush Warsocks


People want everything available in life. In fact, the more people have, the more they want. When their desire is fulfilled, another desire replaces it. These desires are said to be infinite, but the resource to fulfill these desires is limited. There aren't enough resources to give everyone what they want, plus what would be the point?

The concept of scarcity is one of the most important concepts in economics. If we had the resources to fulfill every desire we had, everybody would have everything they wanted. But life is not like that, and neither should the game be; we have limited resources, and we must make decisions on how to use those resources. Economics is the study of those decisions.

Supply and demand is what dictates the direction a price moves in a competitive market.

What does this mean?

A products price will change until it settles at a point where the quantity demanded by consumers will equal the quantity supplied by producers, resulting in a "balance" or equilibrium of price and quantity.

This is how it works out on paper:



There isn't one producer selling an item to the public. There are many sellers of any given item. This gives consumers a choice in buying something. If they don't like the price set by one company, they can buy the product from another company. This encourages the producer to charge a reasonable price for it. If they don't, they will lose business to "the other guy".

Please note this is only one aspect. There's more to it than that.

Review the four, and only four, laws of supply and deman😛

1. If demand goes up and supply remains unchanged, prices increase.
2. If demand goes down and supply remains unchanged, prices decrease.
3. If supply goes up and demand remains unchanged, prices decrease.
4. If supply goes down and demand remains unchanged, prices increase.

As an example, an increase of the money supply can lead to a higher demand in gold. The real value of the money is lost by having the ability to purchase more gold. As the supply of gold remains unchanged, Law #1 apples and the price increases until it settles to where the market supports it. Since we have more desires than resources to fulfill them, we must choose one desire to fulfill over another, buying gold naturally becomes less attractive as its price increases.

This is one of several aspects that will always follow these four laws.

Understand this is the foundation of a competitive market. Gold being the games world currency happens to be the most competitive of them all for a number of reasons.

Also, this is just a drop in the bucket and is no way intended to be "financial advice".

I'm trying to make it easier for people to understand why a market behaves in a particular way, because the answer roots back to these four fundamental laws.

For further reading, consider The Nature of The Beast: Price Fluctuations

Signed,



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