Draw Your Own Supply and Demand Graph
A supply and demand graph might sound complicated or weird, but there's a reason it's so important. Think of it this way: if a video game is brand new, the demand (how many people want it) goes up, and so it costs more money. But as fewer people are buying it, the demand goes down and more of the games are available (supply increases) so the price is lowered (so that a business doesn't have excess goods to move or store). After that happens, we may find that an inexpensive video game is a great thing, and people want to have it (the demand for it increases). This type of cycle happens with everything that's bought or sold in an economy.

But why a graph? Simple. A graph or chart is a visual representation of supply and demand-it helps you see immediately any change in supply and demand for a product, instead of having to stop and read a whole paragraph about it. A graph can also help you predict what might happen with a product in a couple of months. And knowing how to create and read a supply and demand graph can show you how to use your money best.

1. Draw a blank graph with a vertical axis and a horizontal axis.

2. Label the vertical axis "price."

3. Label the horizontal axis "quantities."

4. On the vertical axis, mark points at prices $1 through $10, beginning at the bottom.

5. On the horizontal axis, mark points at quantities 10 through 100, beginning on the left.

6. This is the demand schedule. Plot the quantities demanded at each price.

7. This is the supply schedule. Plot the quantities supplied at each price.

8. Draw a line connecting the price/quantity marks on the demand curve.

9. Draw a line connecting the price/quantity marks on the supply curve.

Looking at the demand supply curves can help us to predict two things about the market for a product - the market price and the quantity that will be exchanged at the market price.