Supply and Demand

The concepts of supply and demand are fundamental to understanding how markets operate. Supply refers to the quantity of a good or service that producers are willing and able to sell at various prices, while demand indicates the quantity that consumers are willing and able to purchase.

The interaction between supply and demand determines the market price and quantity of goods sold. When demand exceeds supply, prices tend to rise, signaling producers to increase production, whereas when supply exceeds demand, prices tend to fall, prompting a reduction in production. This dynamic equilibrium is crucial for market efficiency and resource allocation.