Supply and demand is an economic model of price determination in a market. 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.
The four basic laws of supply and demand are:
- If demand increases and supply remains unchanged, a shortage altogether, thus leads to a higher equilibrium price.
- If demand decreases and supply remains unchanged, a surplus altogether, thus leads to a lower equilibrium price.
- If demand remains unchanged and supply increases, a surplus altogether, thus leads to a lower equilibrium price.
- If demand remains unchanged and supply decreases, a shortage altogether, thus leads to a higher equilibrium price.
Read more about Supply And Demand: Graphical Representation of Supply and Demand, Other Markets, Empirical Estimation, Macroeconomic Uses of Demand and Supply, History, Criticisms
Famous quotes containing the words supply and/or demand:
“Friends and contemporaries should supply only the name and date, and leave it to posterity to write the epitaph.”
—Henry David Thoreau (1817–1862)
“The basis of political economy is non-interference. The only safe rule is found in the self-adjusting meter of demand and supply. Do not legislate. Meddle, and you snap the sinews with your sumptuary laws.”
—Ralph Waldo Emerson (1803–1882)