Let’s say you're five years old at lunch time and the person next to you has a Dunkaroos. You really want his Dunkaroos so you offer to trade him your Fruitopia. The person on the other side of him offers they're Lunchables and an Oreo for the Dunkaroos. This little boy with the ideal dessert has the upper hand because he has what everyone wants so he can demand whatever he wants for it....
THAT is supply and demand.
Technically The law of demand states that, if all other factors remain equal, the higher the price of a good, the less people will demand that good. In other words, the higher the price, the lower the quantity demanded. Like the law of demand, the law of supply demonstrates the quantities that will be sold at a certain price. But unlike the law of demand, the supply relationship shows an upward slope. This means that the higher the price, the higher the quantity supplied.
REAL LIFE EXAMPLE (besides the lunch table)
The show "Pawn Stars" on History Channel offers perfect examples of this. They acquire old or rare things which are already valuable. They also are on television which makes people want their products. These factors lead to the owners of the shop being able to sell their products for even higher escalated prices. The most expensive item in the shop is a 2001 Super Bowl Ring which is being sold for $60,000. The ring itself is hard to earn and even harder to buy (let's face it...anyone that gets a Super Bowl ring would be dumb to part with it) so when there is one for sale, people will pay out the nose for it.
They also use demand when it comes to how much they will pay for an item. They think of it in terms of how much someone will pay them for it; after all, they are in a business to make a profit. Someone may come in with a rare painting and demand $50,000 for it but if they are only going to sell it for that much, they will only offer $30,000 for it. In this case there is not enough demand for the product so the price needs to be lowered.
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