How do supply and demand affect prices?

Supply and demand are two fundamental forces that determine prices in a market economy. When the demand for a product or service increases and the supply remains constant, prices tend to rise due to the scarcity of the item. Conversely, when the supply of a good exceeds the demand, prices are likely to decrease as businesses lower their prices to attract buyers. In essence, the interaction between supply and demand influences the equilibrium price point where the quantity demanded by consumers matches the quantity supplied by producers. This delicate balance is the key driving force behind price fluctuations in a market economy.

This mind map was published on 12 May 2024 and has been viewed 83 times.