supply and demand
Definition
Supply and demand is an economic model that determines the price of goods and services based on their availability (supply) and consumers' desire to buy them (demand). In this context, it impacts the international political economy by influencing trade policies, market stability, and economic growth.
Analogy
Imagine a concert with limited tickets. If a famous band is playing and thousands want to attend, but there are only a few hundred tickets (high demand, low supply), the price of tickets will skyrocket. Conversely, if a lesser-known band has too many tickets available and not enough interested people (low demand, high supply), ticket prices may drop or promotional offers may be made to boost sales. This dynamic reflects how supply and demand can determine the price and availability of goods in global markets.
Related terms
Market equilibrium: The state where the quantity of goods supplied equals the quantity demanded at a specific price point.
Trade policies: Government rules regulating international trade that can affect global supply and demand by imposing tariffs or quotas.
Economic growth: An increase in the capacity of an economy to produce goods and services, compared from one period of time to another, which can be influenced by changes in supply and demand dynamics.
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