Dr. Forrester explains the concepts of supply and demand using examples of a lemonade stand and a cookie store. The video illustrates how supply and demand affect pricing, showing scenarios with high demand and low supply, as well as high supply and low demand. The impact of competition on pricing is also discussed, highlighting how increased supply can lead to lower prices. The video concludes with a summary of these economic principles.

What happens to the price of lemonade when there is only one stand and many thirsty customers?

• The price increases.

• The price is unpredictable.

• The price decreases.

• The price remains the same.

If a new lemonade stand opens and sells lemonade for less, what is the likely outcome?

• The original stand will gain more customers.

• Both stands will have the same number of customers.

• Customers will buy from the cheaper stand.

• The new stand will have no customers.

What is a surplus in the context of lemonade stands?

• More lemonade than can be sold.

• Not enough lemonade to meet demand.

• Equal supply and demand.

• Lemonade sold at a higher price.

How does a small supply and high demand affect the price of cookies?

• The price decreases.

• The price remains constant.

• The price increases significantly.

• The price is unaffected.

What strategy might a cookie store use if there is a large supply but low demand?

• Stop selling cookies.

• Lower the price.

• Keep the price the same.

• Increase the price.