What Is Supply and Demand?

The laws of supply and demand are foundation concepts in the field of economics. The law of demand indicates that under typical circumstances, the greater the price of a good, the lower the demand. The law of supply indicates that the higher the market price, the greater the supply.

In relation to each other, marketing equilibrium is known as the price at which the level of supply for a good exactly equals the level of demand. When supply exceeds demand, a surplus exists, which tends to lead to lower prices. When demand exceeds supply, a shortage exists, and buyers often pay a premium.