Difference between revisions of "Law of supply and demand"
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The law of '''supply and demand''' states that prices in a free market economy will tend to rise or fall based on the relationship between the ''supply'' of goods and services and the ''demand'' for them. | The law of '''supply and demand''' states that prices in a free market economy will tend to rise or fall based on the relationship between the ''supply'' of goods and services and the ''demand'' for them. | ||
| − | While buyers wish to pay as low a price as possible, sellers wish to charge as high a price as possible. When supply is stable, price quickly reaches an equilibrium where ''bids'' and ''offers'' match. | + | While buyers wish to pay as low a price as possible, sellers wish to charge as high a price as possible. When supply is stable, price quickly reaches an [[Equilibrium price|equilibrium]] where ''bids'' and ''offers'' match. |
Revision as of 17:31, June 21, 2007
The law of supply and demand states that prices in a free market economy will tend to rise or fall based on the relationship between the supply of goods and services and the demand for them.
While buyers wish to pay as low a price as possible, sellers wish to charge as high a price as possible. When supply is stable, price quickly reaches an equilibrium where bids and offers match.