Supply and Demand Model

The supply and demand model is a fundamental economic concept that explains how prices are determined in a market. Supply refers to how much of a good or service producers are willing to sell at different prices, while demand is how much consumers want to buy at those prices. When demand exceeds supply, prices tend to rise, encouraging more production. Conversely, if supply surpasses demand, prices tend to fall, prompting producers to reduce output. This model helps illustrate how markets balance the needs and desires of consumers with the capabilities of producers.