What Is Supply and Demand?

Hot day. One cup of lemonade left. Fifty thirsty people.

What happens to the price? You already know. Let's talk about why.

Everything in every market runs on two words. Supply: how much of something exists. Demand: how badly people want it. That's it. These two forces decide the price of nearly everything — lemonade, sneakers, houses, and yes, stocks.

When lots of people want something and there isn't much of it, the price goes up. Fifty people, one cup — whoever wants it most pays the most. That's high demand meeting low supply. Sellers love this.

Flip it around. A hundred cups of lemonade, two customers. Now the buyers are in charge. The kid has to drop the price, drop it again — practically begging someone to buy. That's high supply meeting low demand. Buyers love this.

Most of the time, markets wobble toward a balance — where the amount available matches how much people want, at a price both sides accept. But the moment something changes — a heat wave, a shortage, a viral video — the seesaw tips, and prices move.

And stocks work exactly the same way. When lots of investors want a company's stock and few people are selling, the price rises. When everyone rushes to sell and nobody's buying, it falls. Every flickering number on the stock market is just supply and demand, playing out in real time.

So remember the lemonade stand. Lots of want plus a little bit of stuff? Price goes up. Lots of stuff plus a little bit of want? Price goes down. That's supply and demand — the engine under every price you've ever seen.