The price of a product does not depend on merit, but on supply and demand. Supply and demand form the most fundamental concepts of economics. The law of supply and demand is actually an economic theory that was popularized by Adam Smith in 1776. People’s willingness to supply and demand of a ‘good’ determines the market equilibrium price, or the price where the quantity of the good that people are willing to supply just equals the quantity that people demand. However, multiple factors can affect both supply and demand, causing them to increase or decrease in various ways. According to law of demand, higher the price, lower quantity of the good will be demanded. But unlike the law of demand, the supply relationship shows an upward slope. This means that the higher the price, the higher the quantity supplied. It is important to understand that time is always a dimension on these supply and demand. Longer or shorter time intervals can influence the shapes of both the supply and demand curves. The principles of supply and demand has shown to be very effective in predicting market behavior.

Yogita Parihar

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