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What is the connection between price, supply and demand?

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posted Jul 12 by Swati Tyagi

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1 Answer

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Supply and price are both linked to the demand of a product. The higher the demand the higher the consumer(s) are willing to pay a price for a specific good and or service. The law of demand states that, if all other factors remain equal, the higher the price of a good, the less people will demand that good. In other words, the higher the price, the lower the quantity demanded.

Supply refers to how much of a product/ service the market can offer. If supply is low but demand high then the price will be high because the opportunity cost of buying the product/service has also increased with the price meaning that if people by that product/ service they will likely have to forgo buying something else. But if supply is high but demand low then the price will be low because the opportunity cost has now decreased.

answer Jul 13 by Anurag Kashyap
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