supply and demand is used to determine the prices of goods and services in the marketplace. Understanding the principles behind this law will help you gain perspective into how the marketplace works.

Supply is the relationship between the prices of products and services and their availability in the market. If the prices go up and stay high, the sellers will supply the product in larger quantities to make a profit. Supply depends on demand and price changes and quickly adjusts to these. The changes in demand and price may be seasonal, temporary or permanent, and the seller must adjust their supply accordingly.

Demand refers to the number of goods that consumers want to buy and have the purchasing power to afford at a range of prices. Up to a certain price point, the demand for commodities will remain consistent. Beyond that point, however, buyers will find the products too expensive and the demand for them will go down.



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