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Applying microeconomic concepts to real-life industries like sneakers or video games.
Why does a pair of sneakers cost 1,000 on eBay the next day?
In every market, there is a constant tug-of-war between buyers and sellers. The Law of Demand states that as the price () of an item increases, the quantity demanded () by consumers decreases. Conversely, the Law of Supply states that as the price increases, the quantity supplied () by producers increases because they want to earn more profit. Think of it this way: if a video game is expensive, fewer kids buy it ( drops), but the company wants to make as many copies as possible ( rises).
Imagine a brand releases only 500 pairs of 'Galaxy Kicks.' 1. The supply is fixed and very low (). 2. Because they are cool, 5,000 people want them (). 3. Since , this creates a shortage, allowing the price to skyrocket.
Quick Check
If the price of a popular sneaker goes from 150, what generally happens to the quantity demanded ()?
Answer
The quantity demanded () will decrease.
A store has 200 'Neon Hoodies' priced at Q_s = 200Q_d = 20Q_s > Q_dQ_d$ and clear the stock.
Quick Check
What is the economic term for when the quantity supplied is greater than the quantity demanded?
Answer
A surplus.
Equilibrium isn't permanent. External events can shift the entire demand or supply curve. For example, if a famous basketball player is seen wearing a specific brand of shoes, the Demand Curve shifts to the right. This means at every price point, more people want the shoe. This shift forces the market to find a new, higher equilibrium price. Other shifters include changes in technology, the cost of materials (like rubber for soles), or even viral social media trends.
Suppose a major rubber factory closes, making it harder to produce sneakers. 1. This causes a decrease in supply (the supply curve shifts left). 2. At the old price, is now lower than . 3. This creates a shortage, which pushes the new equilibrium price () higher. Consumers must pay more because the item is now harder to produce.
What happens to the equilibrium price if a product suddenly becomes a viral trend on TikTok?
If and , the market is in...
The Law of Supply states that sellers want to sell more items when the price is lower.
Review Tomorrow
In 24 hours, try to explain to a friend why a 'surplus' usually leads to a store having a sale.
Practice Activity
Find a news article about a product shortage (like computer chips or a specific toy). Identify if the shortage was caused by a 'Supply Shift' (factory issues) or a 'Demand Shift' (sudden popularity).