The law of supply and demand is a theory that can be perfectly observed in practice. <u>According to this law, demand and supply interact with each other by balancing the market for a good or service through price. If demand is high and supply is scarce, the price increases. The opposite is true, if supply is abundant and demand is low, price falls.
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Thus there will be a point where supply and demand are equal. At this point, the price is considered the equilibrium price.
However, this law is true for a market economy, that is, the adjustment between supply and demand is given by the market itself. However, in the real world, other variables can alter the functioning of the law of supply and demand. For example, government intervention in prices or a ban on the entry of new competitors.
Thus, The second answer is correct (B).
