Supply and Demand

The Market’s Most Basic Rule

Supply and demand is the core principle that shapes every market in the world. It influences everything from petrol prices to property values and even the cost of concert tickets. Whenever people want something and there is only a limited amount available, this rule begins to shape the price and behaviour of both buyers and sellers.

How Demand Raises Prices and How Supply Lowers Them

When demand is high but supply is limited, prices rise because more people are competing for what is available. A common example is the surge in interest for new technology on launch day, when a scarce product attracts eager buyers. In contrast, when there is plenty of stock but fewer customers, prices drop to encourage people to buy, just like leftover items after a holiday sale.

A Seesaw That Always Tries To Balance

A useful way to imagine this is to think of a seesaw. When demand increases, prices usually go up to reflect how much people want the product. When supply increases, prices generally fall as businesses try to clear stock. At the point where supply and demand meet, the market finds its natural price and both sides reach balance.

Why Businesses Study Supply and Demand

For businesses, understanding this rule is essential for deciding how much to produce, when to release new products, and how to set prices that customers are willing to pay. Supply and demand act like an invisible guiding force that keeps the economy in motion, helping companies make informed decisions and helping consumers understand why prices rise and fall.