Supply and demand is a central topic to the study of economics because it models how price is determined in a market. The model shows that price will shift until the quantity supplied by producers is equal to the quantity demanded by consumers. This is when an economic equilibrium occurs, when quantity supplied and quantity demanded are equal.
The supply is defined by the relationship between quantity supplied and the price of a good or service. The supply curve is generally upward sloping implying that producers are willing to produce more units as price for the good increases and they are able to sell at a higher price. The demand curve is defined by the relationship between quantity supplied and the price of a good or service. The demand curve is generally downward sloping implying that consumers are willing to purchase more units of a good or service as the price decreases.
According to neoclassical economics, the market will always trend back towards equilibrium in the long run. This is conditional on an efficient market structure where the price signals are readily available to all consumers and producers; there are no asymmetries of information or other inefficiencies.© BrainMass Inc. brainmass.com May 18, 2022, 5:58 am ad1c9bdddf