The law of supply and demand describes the interaction between the supply and demand of the resources. It describes the effect that the accessibility of particular goods and the or demand for that commodity has on its value. Generally, low supplying of products and high demand raise the price. In contrast, if the supply is higher and the demand is lower, the value leads to decline.
When the supply is higher than demand, prices will fall until the demand rises.
<h2>Further Explanation </h2><h3>Supply</h3>
Supply refers to the quantity of goods that suppliers are willing and able to supply to the market at a particular price.
<h3>Demand </h3>
Demand refers to the quantity of goods or services that consumers are willing and able to buy at a particular price.
<h3>Law of Supply</h3>
According to the law of supply, an increase in price of a good or a service results to an increase in the quantity of goods or services that suppliers are willing to supply.
Conversely, a decrease in price on the other hand will result to low supply of quantity of goods and services by the suppliers.
<h3>Law of Demand</h3>
The Law of Demand states that an increase in price of a commodity or service causes a decrease in the quantity demanded by consumers, and a decrease in price would result to an increased demand in goods and services.
<h3>Price determination</h3>
Market price is determined by the forces of demand and supply that is based on the ability and willingness of buyers and sellers to undertake selling and buying.
Buying and selling occurs at an equilibrium price that is agreed upon by sellers and buyers.
<h3>Surplus and shortages in the market </h3>
When the supplier is higher than the demand then there will be surplus in the market and therefore the equilibrium price will fall until the demand increases.
When the demand in the market compared to the supply then there is shortage in the market and therefore the price will increase until the supply increases.
Keywords: Supply, demand, surplus and shortages in the market, equilibrium price
