Law of Supply and Demand

The law of supply and demand combines two key economic theories that explain how variations in the prices (for goods, services, commodities...) affect its supply and demand. While demand declines as the price rises, supply grows. In contrast, as the price falls, supply is constrained and demand increases. On a chart, levels of supply and demand for various prices can be represented as curves. The point where these curves intersect denotes the equilibrium price, also known as the market clearing price, or the point when supply and demand are equal. This point also symbolizes the method of price discovery in the market.