Econ 312

Topics: Supply and demand, Pasta, Bread Pages: 1 (252 words) Published: May 17, 2013
In a capitalist system such as the one in the US, everything is controlled by supply and demand. When there is a scarcity of a specific object/service, the demand for it is higher. A savvy businessperson will recognize the demand and will offer the product/service. Major chain stores are included in this system; they recognize a demand and try to fill it. As a simplistic example: town A has no pizza store. Mr. B realizes that people would like to be able to eat in a local pizzeria, so he opens one.(The demand for and scarcity of pizza leads to a pizza store opening.) Because there is now a pizza store, the demand for flour, tomato sauce and cheese have gone up, while the supply has stayed the same. This leads to a scarcity in these products. In response to the demand, Mrs. C, the owner of the local grocery, who is the supplier for Mr. B's pizza store, begins ordering more flour, tomato sauce and cheese. Mrs. C's flour supplier now has a higher demand for flour, so he orders more from the manufacturer; who produces more flour, creating a higher demand for wheat; the farmer grows more wheat, creating a demand for seed, farming equipment, sprinkler systems..... In addition, the farmer now hires more workers, who get hungry and eat in Mr. B's pizzeria, thus creating a higher demand for pizza.... This cycle continues and grows as long as there are resources to meet the demands.
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