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Supply and demand

This is a concept that I always have trouble with. I get the basic principles.

If the demand goes up, the price goes up and the supply goes up too because everyone is trying to fill the demand. If the supply is limited, the price goes way up because people are willing to pay more to get the product. But, more often, the price goes back down because the market becomes saturated. Then, all the people who invested in supplying the product start feeling a pinch because they cannot get sufficient compensation.

The part I have trouble with is that when the supply exceeds the demand, the price is supposed to go down. Sometimes it does but it seems like the price never goes down to where it was before the demand caused the price to go up. Most times the price just drops a small bit but remains much higher that it was before. I think this is called inflation but we are told that we are not in an inflation period.

I can't get rid of the feeling that I'm missing something.


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