Conclusion
As I previously stated, "Everything you consume is influenced by supply and demand and impact prices of consumer goods and services within an economy." Once supply and demand is learned, everything can be looked at differently, and the explanation of occurences in the market place changes.
This relationship between supply and demand will balance out into an equilibrium with prices; when this equilibrium is reached, a perfect allocation of resources of production will occur. At this point, prices are perfectly set to the interest consumers and companies, and production will occur where they will produce neither too much nor too little product. Businesses use this as the mechanism determining product development and production.
In other words, if the supply of a product matches the demand for the product, the price is said to be at equilibrium and the quantity supplied will match the quantity demanded. If the price of a product is too high, then supply will exceed the demand, and there will be excess supply or a surplus of goods or services. If the price of a product is too low then demand, will exceed supply and there will be excess demand or a shortage of goods or services.
The video clip from the Hudsucker Proxy provides an example of how prices are changed in response to demand. Prices will rise or fall based on the supply and demand for goods or services. The change in demand for Hula Hoops intially decreased the price due to a lack of demand. Subsequently, demand sky-rocketed for Hula Hoops and led to a large increase in the price level, as consumers who wanted to buy a Hula Hoop were willing and able to pay more for the toy.
