GED Social Studies
Supply, Demand & Markets
Prices in a market are a negotiation between how much sellers offer (supply) and how much buyers want (demand). Price rises when want outruns offer, falls when offer outruns want. Every question is one nudge to the diagram: name the curve that moved and the price follows.
The words first
- demand
- how much buyers will purchase at each price — rises as price falls
- supply
- how much sellers will offer at each price — rises as price rises
- equilibrium
- the price where offered amount = wanted amount
- shortage / surplus
- want exceeds offer (price too low) / offer exceeds want (price too high)
- scarcity
- the starting fact of economics: limited resources, unlimited wants
The method
THE TWO-QUESTION METHOD for any event
1. does the event hit BUYERS (demand) or SELLERS (supply)?
2. does it push that side UP or DOWN?
then read off the price:
demand ↑ → price ↑ demand ↓ → price ↓
supply ↓ → price ↑ supply ↑ → price ↓
WORKED NUDGES
frost kills half the orange crop → sellers (supply) ↓ → price ↑
a study says coffee is healthy → buyers (demand) ↑ → price ↑
new factories make cheap TVs → supply ↑ → price ↓
fad for a toy ends → demand ↓ → price ↓
SHORTAGE vs SURPLUS
price set BELOW equilibrium → everyone wants it, shelves empty → shortage
price set ABOVE → shelves full, no buyers → surplus
Worked all the way through
The problem
A frost destroys much of Florida's orange crop while juice remains as popular as ever. What happens to the price of orange juice, and why?
- Step 1 — Which side did the frost hit?Growers — the sellers. This is a supply event; buyers' wants didn't change.
- Step 2 — Which direction?Less fruit exists to sell: supply DOWN.
- Step 3 — Read the price rule.Supply down, demand steady → the same number of buyers chase fewer cartons → price UP.
- Step 4 — Say the mechanism, not just the arrow.Stores can charge more because scarce juice will still sell out.
On the board
frost hits growers
a SUPPLY event
supply ↓
less juice exists
demand unchanged
buyers still want it
same buyers, fewer cartons
price ↑
Answer
Price rises — supply fell while demand held steady
A second one, in a different form
A city caps rent far below the market rate. Using supply and demand, what does the cap produce?
price forced below equilibrium
cheap rent → more people want units
demand side swells
low returns → fewer units offered
supply side shrinks
want > offer → shortage
waiting lists
Answer
A housing shortage — more seekers than available units at the capped price
The usual mistake
Moving supply and demand at once and getting tangled. Hold one still.
Check yourself
Never answer with just an arrow. Say which curve moved, which way, and why — "supply fell because the frost destroyed crops, so price rose." The two-question method sorts every event before the answer choices can confuse it.
Practice it
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