Economics · Level 2 · 103 words
Where Price Comes From
Original passage © Team AM, written for Hone Literacy.
Prices are not set by a single person. They emerge from a tug-of-war between two forces: how much of a thing is available and how much people want it. These forces are called supply and demand.
When many people want a product but little of it exists, the price rises. Buyers compete, and sellers can ask for more. When a product is everywhere but few people want it, the price falls, because sellers must lower it to attract anyone at all. Most of the time the two forces pull toward a balance, a price where the amount offered roughly matches the amount wanted.
Comprehension questions
1. What is the passage mainly about?
- A How to start a business
- B How supply and demand together shape prices
- C Why oranges are expensive
- D How buyers can avoid paying
Show answer
B. How supply and demand together shape prices
The passage explains that price emerges from the interaction of supply and demand.
2. Based on the passage, what would likely happen to the price of umbrellas during a long drought?
- A It would rise sharply
- B It would likely fall, since fewer people want them
- C It would stay exactly the same
- D It would be set by the government
Show answer
B. It would likely fall, since fewer people want them
Lower demand pushes price down, as the passage says sellers must lower prices when few people want a product.
3. In the passage, 'emerge' most nearly means
- A disappear
- B come into being from something
- C stay fixed
- D be commanded
Show answer
B. come into being from something
Prices 'emerge from a tug-of-war,' meaning they arise out of those forces.
Source: Written for Hone Literacy. Original passage © Team AM, written for Hone Literacy.