Supply and Demand
The economic model explaining how price and quantity of goods are determined by the interaction of buyers and sellers.
Also: law of supply and demand
Definition
Supply and demand is the foundational economic model describing how the price and quantity of goods and services in a market are determined by the interaction of buyers (demand) and sellers (supply). The law of demand states that as price rises, quantity demanded falls (and vice versa). The law of supply states that as price rises, quantity supplied rises (and vice versa). Market equilibrium occurs where supply and demand curves intersect ”” the price at which quantity supplied equals quantity demanded.
Example
“When a drought reduces wheat supply while demand remains constant, wheat prices rise until a new equilibrium is reached ”” a real-world supply-demand interaction.”
Usage Examples
- 1
“The team applied supply and demand best practices to improve their economics outcomes significantly.”
- 2
“Understanding supply and demand is essential for anyone building a career in Finance.”
When & How to Use
Use 'Supply and Demand' when working in Economics contexts where supply and demand is the foundational economic model describing how the price and quantity of goods and services in a market are determined by the interaction of buyers (demand) and sellers (supply).
- ▸Applying supply and demand principles during a economics project or initiative
- ▸Explaining supply and demand to a junior team member or stakeholder unfamiliar with Finance
- ▸Evaluating options or proposals using supply and demand as a decision-making criterion
Etymology & Origin
The term 'Supply and Demand' derives from professional usage and entered Finance professional usage as the field formalised in the 20th century.
History & Evolution
The concept of supply and demand has evolved alongside Finance. Early practitioners relied on informal methods; structured approaches emerged with the professionalisation of economics in the mid-20th century. Today, supply and demand is a standard part of Finance practice globally.
Synonyms
- supply and demand
- market equilibrium forces
- price mechanism
Images
CC-licensed · free to useVideo
Related Terms
- equilibrium
- elasticity
- market-price
- economics