6. What Are Supply and Demand in the Markets?

In any capitalist marketplace, supply and demand rule. Consider a government study into the benefits of a certain wonder product that reports that it is 100 percent safe and effective. High-profile celebrities provide endorsements to the product, and there are no competitive products anywhere. Does this mean the maker of this product will see its profits rise?

The answer is maybe. Profits will rise if, and only if, sales are made. If there is no demand for the product at the price at which it is offered, there will be no sales. The same reasoning holds true in the financial and commodity markets. If the price of a stock or commodity is too high, there will be no demand and no buyers. If ...

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