When’s the last time you heard a friend or family member complaining about the high price of something? Chances are it might have been the last time you were at the gas station. High gas prices have been a source of much complaining for quite a while now.

You may have done some complaining of your own, too, though. Have you been to the movie theater or wanted to buy a video game recently? If so, you’ve probably seen how prices on just about everything tend to go up over time.

But have you ever stopped to WONDER about how those prices get set? Let’s find out as we take a look at some basic economic principles today in Wonderopolis!

How prices are determined depends upon the type of product or service you’re talking about. There are many, many factors that go into setting prices. In fact, there are too many to cover in a single Wonder of the Day.

For example, taxes and government regulations often impact prices of certain goods and services. We’ll put those factors aside for now and instead concentrate on the basic economic principles that work together to help determine prices in a normal free market economy.

Although some people believe certain objects have an objective, intrinsic value, any particular good or service is ultimately only worth what buyers are willing to pay for it. That leads us to the concepts of supply and demand.

The supply of a good or service is how much producers are willing to make at a given price. The demand for a good or service is how much consumers are willing to buy at a given price.

Supply and demand interact with two other factors: quantity (how much of the good or service ends up in the market) and price (what is charged for the product or service given supply, demand, and quantity in the market).

All these factors influence each other. To see how they work together, let’s look at some real-world examples. Do you remember the last time a new must-have techno-gadget came on the market? Demand was very high. Everyone had to have it. Unfortunately, supply was low. It was brand new and the manufacturer had yet to make many of them.

What was the price of the item? It was likely extremely high. You wouldn’t be able to find it on sale. In fact, you probably couldn’t even find it in stores, because it was being bought as quickly as it could be produced.

Of course, over time, the opposite can also happen. When that latest techno-gadget came out, last year’s model was still on shelves. No one wanted it now. Demand was very low. Because people weren’t buying them, supply was plentiful and the quantity on store shelves was more than needed. What happened to its price? It likely fell quickly.

As the price fell and the item was offered on sale, more people probably wanted to purchase it for a lower price. Sooner or later, the price would settle at a lower amount that would balance the supply with the public’s demand for the product.

All this happens constantly and automatically as we go about our daily lives. Manufacturers make decisions about how many items to supply based upon their estimates of demand. Demand can often be influenced by advertising and other factors. Consumers’ actual purchases affect the quantity of items available and prices fluctuate accordingly.

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    • Hey Rebecca! We are so glad you liked the video! Have you ever wondered about prices while shopping with your family before? It is good to know about! Thanks! :)

    • Hey Daisy! That is a great connection! Gas prices go up (and down) a lot. You could count how many times you notice it change in a month! That would be interesting! :)

    • Hey Xavion! Good question! Prices of goods are determined supply and demand, and there’s lots of different factors that can change that. Thanks for WONDERing with us! :)

  1. I really like this website. I think it’s interesting on how prices are set and how they go up. Thank you for explaining these things to me!

    • Hey Corey! Thanks for visiting Wonderopolis! We LOVE hearing from our Wonder Friends and are so glad you enjoyed today’s Wonder. Thanks! :)

    • Hey Sarah! Gas prices are definitely something that goes up and down according to supply and demand! It’s all a legal part of our economy. Thanks for WONDERing with us! :)

  2. I know every body loves money, but why don’t you guys make one about ‘what is in strawberries?’ As you can probably notice, I really love strawberries.

    • Hey Alivia! Thanks for sharing! We bet you think a lot more than you think! :) We are glad that you enjoy WONDERing at Wonderopolis! :)

  3. I like Wonderopolis because if you’re wondering about anything, you can just type it in and the website will read all the info that it says! You can also explore Wonders that other people are thinking about too!

    • Hey Macey! Thanks for visiting Wonderopolis! What’s a Wonder that you were thinking about one day and then found it on Wonderopolis? Or did you ever find a new idea to wonder about from somebody else? Thanks! :)

  4. I like Wonderopolis because it has something new to read and learn about everyday, like how prices are chosen and go up. Also, if you wonder about something, you can type it in and look it up.

    • Hey Claudia! Thanks for your awesome comment! We love that you come to Wonderopolis to learn something new each day. What has been your favorite thing to search for on Wonderopolis lately? Keep WONDERing! :)

  5. I like Wonderopolis because if you wanted to know anything, you could just look on Wonderopolis and they would tell you the answer. :)

    • Hey Noelle! With more than 1,000 Wonders of the Day to choose from, that is definitely a lot of stuff you can look up! Did you look anything new up today? Thanks, Wonder Friend! :)

    • Hey Natalie! Thanks for sharing how much you liked today’s Wonder! Have you ever noticed prices change on something other than gas? Let us know what you think! :)

  6. THOUGHT: That is harsh. Can we just do it like the old days? Like when it was 50 cents?

    CONNECTION: I thought that we weren’t allowed to raise the price of gas. Isn’t it illegal?

    WWOTD: I am a consumer of Arby’s

    PREDICTION: I think tomorrow’s Wonder is about porcupines.

  7. Make a Connection: This article reminds me of my parents buying a house.
    Burning Question: What causes the low supply of oil?
    Learned: I learned that supply and demand is what causes to prices to increase and decrease.

    • Hey Wonder Friend! Like gasoline, house prices are definitely something that go up and down with supply and demand. Oil is a non-renewable resource – also known as a limited resource – which means it that cannot be replaced in the natural environment as fast as it’s used up. That makes for a limited supply! Can you think of any other examples of renewable and non-renewable resources in our environment? Thanks! :)

  8. THOUGHT: I think gas prices need to go back to 50 cents.

    CONNECTION: I hate it when you spill gas on you and it smells so gross.

    WWOTD: Todd and I are consumers of Starbucks.

    PREDICTION: I predict tomorrow’s wonder will be about family.

    • Hey Destiny! Thanks for WONDERing with us today! Do you know how many years you’d have to go back to reach a time when gas was only 50 cents a gallon? Here’s a link to the History of Gas Prices from the U.S. Dept of Energy. Can you imagine it used to be even lower than 50 cents? That’s a funny thing to WONDER about, isn’t it? Thanks, Destiny!

  9. Comment: I didn’t really get the video.

    Prediction: I predict tomorrow’s wonder will be about zoos.

    Question: Why is gas so much?

    WWOTD: I am a consumer.

    • Hey Deven! Sorry you didn’t get the video at first. Do you maybe have a classmate or teacher you could watch again together? It can help to WONDER together! Thanks for visiting Wonderopolis! :)

  10. THOUGHT: I don’t want gas prices to go any higher. What they should do is go lower.
    CONNECTION: My mom and dad always get frustrated when the gas prices go up.
    WWOTD: I am a consumer of food.
    PREDICTION: It might be about how things got spiky or how they make spiky things.

    • Hey Jeremiah! We learned in today’s Wonder how to make prices go down – you have to increase supply or decrease demand! Can you think of ways we could do that with gasoline? Thanks for WONDERing with us! :)

  11. THOUGHT: I really liked the passage! :-)
    CONNECTION: My mom always complains about the prices of gas.
    PREDICTION: I think tomorrow’s wonder will be about spikes or pointy objects.
    WWOTD: The lady at the gas station was a consumer.

    • Thanks for sharing that you really liked today’s Wonder! We are so glad you visited Wonderopolis! Do you talk about prices of other items with your mom? Maybe you can learn about other goods that have prices going up and down! Share with us any ideas you come up with! Thanks! :)

  12. Connection: This article reminds me of when my mom has to pay for gas.
    Burning Question: Why does the cost of items have to rely on supply and demand?
    Learned: I learned that when the supply is high, the price can be cheap.

    • Hey Wonder Friend! Thanks for commenting on today’s Wonder! Supply and demand is what drives a free market economy! Can you think of an example like in the Wonder when a new techno-gadget comes to the market? Thinking of a specific example with your class can sometimes help explain a topic better! Have fun WONDERing! :)

  13. Make a Connection: This reminds me of the time my dad would stop for gas and I would stare at the soaring numbers.
    Burning Question: Why would the gas prices go higher? Texas is the oil state after all.
    Learned: I learned how new stuff gets purchased as it is produced.

    • Hey Sophia! Thanks for WONDERing with us today! Do you remember how much gasoline cost the last time you were to the gas station with your dad? Maybe you could track the prices together and see how much it changes each time? That could be a fun thing to WONDER about! Thanks! :)

  14. Connection: I complain about the video game prices too.

    Question: I wonder if gas prices were always like this?

    What I Learned: I learned why my parents complain about gas prices.

  15. The video was about prices increasing such as gas and electronics.

    connection: every time I go with my mom to the gas station the prices are higher

    question:Why does every thing rely on prices of things?

    I learned that every thing relies on prices

    • Nice work, Gracie! Thanks so much for sharing your comment and telling us about what you learned today! We think it’s great that you’ve been observing the change in gas prices each time you go to the gas station with your mom. It’s so cool to find things to Wonder about, even if you’re helping your mom with errands! What fun! :)

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Have you ever wondered…

  • How are prices set?
  • What is supply and demand?
  • Can you help your parents keep track of prices?

Wonder Gallery

hVimeo Video

Try It Out

Today’s Wonder talked about some basic lessons in economics. Now grab a friend or family member and try your hand at the supply of activities below that are in high demand.

1. Have you heard the saying “When life gives you lemons, make lemonade”? See how well you can do in this situation by running your own online lemonade stand. You’ll be challenged to balance supply, demand, and prices to serve the most customers and make the most money.

2. Ready for some more games? Have fun learning about how money works in the real world by trying these online games about economics.

3. Do you keep your eye on prices? That probably depends upon how old you are. If you drive a car, you undoubtedly keep an eye on gas prices, as they go up and down constantly and can have a big impact on your monthly budget.

If you have your heart set on a particular new toy, you might be saving up enough money to buy it as soon as possible. You may also be keeping your eye on the price of that toy in various stores, so you can seize the opportunity to get it on sale if possible.

Did you know that you can take what you learned today and put it to good use helping your parents keep an eye on prices? It’s true! Get in the habit of going to the grocery store with them. Take along a pencil and a notebook and make notes of the prices of things they normally buy.

Keep your notebook and take it with you each time. The next time you buy a particular item, compare the current price to what the price was last time. Is it higher or lower? If it’s higher, why do you think that is? If it’s lower, let your parents know, so they can stock up if it’s on sale for a really good bargain.

Keeping track of prices is a good habit to form at an early age. When you get out on your own one day, you’ll want to be the best consumer you can be. And that means getting the most for your money every time you have to purchase something!

Still Wondering

Why do things cost so much more now than they used to? In EconEdLink’s When Gas was a Quarter! lesson, children will find out about inflation in the United States.

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