Economics is a fundamental part to finance. It is as crucial as water is to living beings.
Supply is the amount of goods that is available to consumers and demand is the the ability to purchase a good at a given point in time. When suppliers and consumers go to the market play, these 2 powerful forces collide to get a market price for a good.
Today we will see the effect of oversupply and undersupply, keeping everything else constant.
When a good is oversupplied, it will cause the good to lose value, hence the suppliers will reduce the price to ensure everything gets sold. For instance, in the recent housing bubble in many parts of America, there was an oversupply of houses. This lead to the destruction of prices of the houses.
When a good is undersupplied, it will cause the good to gain in value. The suppliers will increase the price as there is limited supply of goods. It is the case where not everyone can get a slice of the cake. An example would be a recent case of flooding in Australia that destroyed majority of the banana plantations. It caused the prices of the bananas to hike about 3 times the normal rate.
If anyone is able to predict the economy and trade according to its strengths, that person would be a millionaire many times over.
