The Relationship Between Supply and Demand

The relationship between supply and demand is directly reflected by the price variable. That which you subsidize, in other words, other people's money are involved in buying it. The price goes up because you have now divorced the value of the commodity from the supply and the demand. Six year olds like candy, right? Because their mam and dad have always rewarded them with the sweet flavor of candy when they do something good. So candy is valuable to the child. All right. Now what if there are only two pieces of candy in the house? We've eaten the rest of it. There's only two Pieces of Candy left. This changes what the children are willing to do to obtain the