Understanding Supply and Demand in Economics

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6 Questions

What fundamental concept influences economic decisions in buying and selling goods?

Supply and demand

What happens when price increases in supply and demand?

Demand decreases and supply increases

How is fair value in price defined in the context of supply and demand?

When supply matches demand

What is the goal when looking at supply and demand trading?

Identify when institutions enter the market

How are supply zones typically characterized in price charts?

Marked by high points before downward moves

What is the purpose of mapping out supply and demand zones on price charts?

Identify potential trading opportunities

Study Notes

  • Supply and demand is a fundamental concept that influences economic decisions in buying and selling goods, including groceries, video games, clothes, and currencies.
  • Price determination in economic theory is primarily based on supply and demand, where the interaction of these two factors determines commodity prices within a market.
  • The relationship between price and quantity is crucial in supply and demand, where price increases lead to a decrease in demand and an increase in supply, and vice versa.
  • Fair value in price occurs when supply meets demand, representing an acceptable value for both buyers and sellers.
  • The concept of supply and demand extends beyond physical goods to financial assets like currencies, where institutions buy low and sell high to make profits.
  • When looking at supply and demand trading, the goal is to identify when institutions enter the market and trade alongside them based on their footprints.
  • Supply and demand zones are created through ranges or pivots, with ranges indicating sideways price movement and pivots showing sharp moves followed by rapid expansions in opposite directions.
  • Supply zones are marked by high points in price before downward moves, while demand zones are marked by low points before upward moves.
  • Mapping out supply and demand zones involves identifying ranges or pivots on price charts and waiting for price to return to these zones for potential trading opportunities.
  • Refining supply and demand zones can be done by using a combination of range and pivot concepts, allowing for flexibility in marking out zones based on specific price movements.

Explore the fundamental concept of supply and demand and its impact on pricing decisions in various markets, from groceries to financial assets. Learn how price determination is influenced by the interaction of supply and demand factors, and how to identify supply and demand zones for trading opportunities.

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