SUPPLY & DEMAND.

What is Supply & Demand?

What is the economy without the Supply and Demand theory? It is one of the most important concepts of the market economy. Demand is based on the public. It's the amount of a product or service people the "buyers" are willing to purchase and at what certain price. Now the demand relationship is very easy. It's basically the relationship between price and demand. Now supply, is how much the market can offer or produce for the buyers. The relationship between price and how much of a good or service is available to the market is known as the supply relationship. 

Determination of Prices: 

Price is based on the interaction of supply and demand. Equilibrium price is when the buyers and sellers can come to an agreement on a price. The less amounts of a product there is the more money a consumer would have to pay in order to balance the ration the shortage.  If a lot of one product is produced, also known as a surplus, producers would have to lower their prices in order to sell all products and not have any excess . Prices control whether supply and demand are at an equilibrium. 

In this chart it shows the clear relationship between supply and demand.The red lines show the relationship between price and supply. As supply increases the price decreases.The blue line shows how as the supply decreases, the price increases along with it.