If suddenly the world supply of hard drives is cut to 10% of its normal values by a chance event (and we concentrate on the time period before new compensating production can be started) then those hard drives become more valuable. The price goes up, so that the people who are willing to pay the most for the drives get them. If Bob will only pay $100 for a drive because he's just using it to store his 2TB of cat pictures, but Sam will pay $500 because he needs the drive to run his business, then Sam will get the drive but Bob won't. If you try to hold down prices artificially with legislation (price ceilings) then each is equally likely to get the drive, which most agree is not good.
(Now, there are a million caveats to this naive Econ 101 treatment, especially regarding basic necessities--water, food, shelter--and disaster situations. And any normative "should" statement requires people to agree on a theory of ethics/morality. But in this case, most will agree that the basics of supply and demand lead to the appropriate outcome.)
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Incidentally, I was surprised to find that the Khan Academy has a bunch of macroeconomics and finance lectures, but little in the way of basic microeconomics. (This is especially funny because microecon is better understood.) Anyone know a better source for an introduction to supply and demand?
For philosophical types, I recommend 'New Ideas from Dead Economists' by Todd Buckholz. If you just want to get going with the math, I like the Barrons Business Review book on Economics by Peter Eisen. You should be able to find either of these used for a few bucks.
The reason macroeconomics is on the Khan Academy and has more general interest these days comes from the fact that people feel like their lives are in turmoil due to the economy, the real estate collapse, and Wall Street, and they don't understand how any of it works. Macroeconomics may be incomplete and perhaps even problematic, but it's the subject that can most shed a light on complex interconnected problems as opposed to local specific ones.
It will be interesting though to see what effect a >50% supply decrease has on prices and the market once things com e to equilibrium when the timeline of the supply coming back is known.
Well, yes and no. Apologies for reducing your logic to the absurd, but if Iran dropped a nuclear bomb on NYC tomorrow then lot's of people would die, basically exactly what you would expect to happen if that bomb was dropped there. Does that mean everyone who treats it as a big deal (in sarcastic terms: "with a breathless tone") is making a big deal out of nothing?
Yes, with the details that there will be a flood, and that x% of HDDs are made there, and that the flood will shut down production for X months, then prices rising are exactly what you would expect. The reason for it being newsworthy and to some unexpected is that we didn't know the flood would happen, and even after they did plenty of people had no idea, having never had need to think about it, that it happened where so many HDDS are made. Hence why being told that, and therefore what it means, is unexpected.
"It concludes that in a competitive market, the unit price for a particular good will vary until it settles at a point where the quantity demanded by consumers (at current price) will equal the quantity supplied by producers (at current price), resulting in an economic equilibrium of price and quantity."
Note that the "comptetitive market" bit is important as it implies that the market is fully "free", which almost never happens IRL. Price fixing, strategies, stock market, governments, you name it. There are plenty of ways which make this model too basic in many cases. Worth knowing anyway.
That kind of things is best learnt with a grain of salt and some marketing knowledge as well. Read all the posts on "finding the right price" on HN to see how it does not necessarily apply -- but somehow does.
I don't understand basic economics. It's something I regret and would like to change.