Unless you’ve studied economics, the economy can be confusing. With the uprising of people taking action in the market and the number of conversations springing up around the economy, many people are confused and looking for answers.
There’s no need to panic; it’s never too late to learn about the economy! These are the four basic things everyone should understand about the economy to be a part of most conversations about it.
Supply and Demand’s Importance
Supply and demand can’t be understated. Without direction or the consumers’ need for a product or service, there would be no need to supply the good or service. This will directly influence how many companies provide this good and how much the item or service will cost.
This can be most easily seen in the housing market since most people will notice fluxes and changes there. A high demand shifts the market into a ‘sellers’ market’ where houses are scarce, and sellers can pick whatever price they want to sell. In return, a high supply with low demand changes it into a ‘buyers’ market,’ which ensures that buyers can bargain the price down as low as they want to go, without having to worry about bargaining too hard.
What Causes Inflation in Prices
Inflation can be rough; it’s what forces prices to skyrocket over time, and is why when we look back at prices from fifty years ago, we can be a little stunned. Inflation is caused by increases in production costs, which are caused by increases in property costs.
Inflation is a natural part of the market that won’t ever truly stop, but most wish it would slow instead of skyrocketing as quickly as it has been for the last fifty years.
What Marks the Cost of Living
The cost of living is different based on where you live and what year it is. This number is reached by averaging out how much it costs to spend a month or year in a location. This includes groceries, gasoline, entertainment, and housing. A city like Seattle will have a far higher cost of living than a smaller town like Des Moines, Iowa. Any economic expert would be able to point out that cities are also ahead in how much is spent on workers’ wages. This is also why there’s more poverty found in cities than anywhere else.
Why Are Interest Rates Charged
Interest rates can be a point of frustration for anyone. When we take out a loan, we hope that we only have to pay the face value of whatever we’re purchasing. Unfortunately, it doesn’t work that way. Interest rates come from the lender requesting payment for the service of lending you money. This could be in the form of car payments, house payments, or any other kind of loan you receive. Naturally, the better your credit score, the lower your interest rates, but the only way to ensure they stay low is to pay off your loan quickly in an attempt to avoid them altogether.
