The concept of and is fundamental to understanding how markets operate. Supply refers to the total amount of a good or service that is available to consumers, while demand is the desire of consumers to purchase that good or service. When the supply of a product exceeds the demand for it, there is usually a , which can lead to a decrease in price. Conversely, when demand exceeds supply, a occurs, often resulting in higher prices.
Factors that can affect both supply and demand include changes in consumer preferences, price changes, and external events such as or shifts. For example, if a new trend increases consumer interest in electric cars, the for these vehicles may rise significantly. As a response, manufacturers may increase their production levels to meet the new , reflecting the market's ability to adjust over time.
Another important concept is the , which occurs when supply equals demand. At this point, the market is considered stable, and the prices tend to remain consistent as long as there are no external shocks or changes in consumer behavior. If there is a change in either supply or demand, the equilibrium price will shift, causing the to seek a new balance. Understanding how these dynamics interact can help businesses and consumers make informed decisions in the marketplace.
