Supply and Demand

Supply and demand is the basic model economists use to explain how the price and quantity of a good traded in a market are determined. Demand describes how much of a good buyers are willing and able to purchase at each possible price, generally more at a lower price and less at a higher one, while supply describes how much sellers are willing to offer at each price, generally more at a higher price and less at a lower one. The price at which the quantity buyers wish to purchase equals the quantity sellers wish to offer is called the equilibrium price, and the model is used throughout economics to analyze how a market responds to a shift in buyer preferences, seller costs, or an outside intervention such as a tax or a price control.