Meaning of Law of supply and demand
What is the Law of supply and demand:
The law of supply and demand, in economics, is a model that describes the way in which prices vary based on the supply of a product or service and its demand by consumers in the market.
In this sense, the supply would be the quantity of a product or service put up for sale in the market, while the demand would be the quantity of the same product or service that people actually want to purchase.
See also Supply and Demand.
Thus, supply and demand, in a free market system, interact with each other to define, spontaneously and without the intervention of external agents, the prices of goods or services and the quantities of these to be produced. .
Some governments often manipulate supply and demand to influence the consumption of a good or to increase its demand. Examples of this are the high taxes on tobacco to inhibit its consumption, or the subsidy of education to motivate the population.