What Is the Law of Supply and Demand?

What Is the Law of Supply and Demand?

The law of supply and demand is an unwritten rule which states that if there is little demand for a product, the supply will be less, and the price will be high, and if there is a high demand for a product, the price will be lower. If the demand for a product is high, the supply becomes greater, driving down the price.

The law of demand states that the higher the price of a product, the less consumers will demand that product. The law of supply says that producers of a particular good raise the price of that product to increase revenue. Supply and demand work together to help determine how much of a product is produced and what the maximum price of that product can be, to increase revenue for the producer without decreasing the demand.