Supply and Demand Analysis

Supply and demand analysis is a fundamental economic model that explains how prices and quantities of goods and services are determined in a market. Supply refers to how much of a product producers are willing to sell at various prices, while demand reflects how much consumers want to buy at those prices. When demand exceeds supply, prices tend to rise, encouraging more production. Conversely, when supply exceeds demand, prices typically fall, prompting producers to cut back. This balance between supply and demand helps dictate market conditions and influences consumer behavior and production decisions.