Supply and demand is a fundamental economic concept that explains how the prices of goods and services are determined in a market.
Supply refers to the amount of goods or services that producers are willing and able to offer for sale at a given price and time. It is influenced by factors such as production costs, technology, and the availability of resources.
Demand refers to the amount of goods or services that consumers are willing and able to buy at a given price and time. It is influenced by factors such as consumer preferences, income levels, and the availability of substitutes.
The interaction between supply and demand determines the equilibrium price and quantity of a good or service in a market. When the supply of a good or service exceeds demand, the price will decrease until the quantity demanded equals the quantity supplied. Conversely, when demand exceeds supply, the price will increase until the quantity supplied equals the quantity demanded.
Changes in either supply or demand can shift the equilibrium price and quantity of a good or service. For example, if the cost of production increases, the supply curve will shift leftward, resulting in a higher equilibrium price and lower equilibrium quantity. Similarly, if there is an increase in consumer income, the demand curve will shift rightward, resulting in a higher equilibrium price and quantity.
