Writing of the Declaration of Independence

Law of Supply and Demand

 

The Law of Supply and Demand is an economic theory that stipulates that the scarcity or amount of a product available (Supply) and the desirability of the product (Demand) are significant factors in determining the price of the product.

Example:

Excluding all other factors...

  • As demand increases price increases.

  • As demand decreases price decreases.

  • As supply increases price decreases.

  • As supply decreases price increases.

 

  • The more available (High Supply) the lower the price will be.

  • The less available (Low Supply) the higher the price will be.

  • The greater the demand (High Demand) the higher the price will be.

  • The lower the demand (Low Demand) the lower the price will be.

  • The less available (Low Supply) and more desirable (High Demand) that a product is the higher the price will be.