How the Economy Works
What an economy is; producers and consumers; supply and demand; why prices change; the basics of how markets work
What a learner can do afterwards
- Explain what 'supply and demand' means using a simple example (ice cream on a hot day)
- Describe the difference between a producer and a consumer
- Give a reason why the price of something might go up or down
The lesson
Every day, people make things, and other people buy them. All that buying and selling together is called an economy. The people who make or grow things are called producers. The people who buy and use those things are called consumers. You already know how buying works. This lesson looks at the bigger picture behind it.
Mia's uncle grows strawberries on his farm and sells them. He is a producer. Mia's family drives to the farm and buys a basket. They are consumers. The strawberries move from the producer to the consumer, and money moves the other way, back to the producer.
Prices often follow supply and demand. If lots of people want something but there isn't much of it, sellers can charge more. If there's plenty and few buyers, prices tend to drop. That is part of why a cone can cost more at the beach in summer than at a supermarket in winter.
Producers make things, consumers buy them, and prices shift depending on how much people want something and how much of it there is.
Watch it
Where it sits
Where this leads
Jobs that lean on this skill. Follow one to see everything it is built on.
8 questions wait behind this lesson, each with its answer explained. Every answer feeds the sky: stars light as they are learned, and dim when it is time to come back.