Supply and demand

Supply and Demand in the Fundamental Principles of Economics The principle of supply and demand is one of the pillars of economics and explains how the prices of goods and services are determined in a market. It describes the relationship between the quantity of a product available (supply) and the quantity that consumers are willing to buy (demand). 1. What is Demand? Demand represents the quantity of a good or service that consumers are willing to purchase at a given price. It is influenced by factors such as:
Price of a product: If the price goes up, producers tend to increase production to make more profit. Cost of production: If the cost of raw materials or labor increases, supply may decrease. Technology: Technological improvements can make production more efficient, increasing supply. Market Equilibrium When supply and demand meet, the market reaches an equilibrium point, where the quantity supplied equals the quantity demanded at a certain price. If there is an imbalance: Excess supply: When there are too many products on the market and too little demand, prices tend to fall. Excess demand: When too many people want to buy a product, but there is too little supply, prices tend to rise.