Explain the law of supply and demand and why it is important.

The law of supply and demand is one of the fundamental concepts of basic economics. It is the foundation on which several economic theories have been built. The law of demand states the higher the price of a good, the less people will want to buy it. While the lower the price, the more people will want to buy it. In conjunction with this, the law of supply states the greater the price of a good, the more goods will be produced. Vice versa, the lower the price of a good, the less goods would be produced. This is because a producer is more willing to produce a good in a greater quantity if they believe they would make more money at a higher price. Equilibrium is the point on the graph in which supply and demand interesect, meaning the producers and the buyers are both satisfied with the economic conditions.

At this point, once one has a firm understanding of supply and demand, the student can use this to explain concepts such as excess supply, excess demand, as well as shifts and movements in the supply and demand curve. The best way to teach these concepts is through visual representations in the for of a supply and demand graph.