Supply and demand is the core model of market economics. Demand shows how much consumers want at each price; supply shows how much producers will offer. Together they determine market prices and quantities.
The Foundation of Market Economics Supply and demand is the most fundamental model in economics — a simple but powerful framework that explains how prices are determined in free markets and how changes in market conditions affect buyers and sellers. What Is Demand? Demand refers to the quantity of a good or service that consumers are willing and able to purchase at various price levels, holding all other factors constant. The law of demand states that, all else equal, as price increases, the qua