The Law of Supply and Demand — Basic Market Forces

This is the Law of Supply and Demand — the invisible force behind price changes, market movements, business strategy, and even what you pay for eggs.

Let’s get smarter.

What Is the Law of Supply and Demand?

At its core, the Law of Supply and Demand explains how prices are determined in a market economy through the interaction of two forces:

Demand: How much of a good or service people want at different prices

Supply: How much of that good or service producers are willing to offer at those prices

When these two forces meet, they create a market equilibrium — a price and quantity that balances what buyers want with what sellers are willing to provide.

Prices aren’t random. They’re signals — constantly adjusting to match supply and demand in real time.

Let’s Break It Down