What is the impact of supply and demand on pricing?

What is the impact of supply and demand on pricing?

Supply and demand are fundamental economic concepts that determine the price of goods and services. When demand increases and supply remains constant, prices tend to rise. Conversely, if supply increases and demand remains constant, prices usually fall.

Can you give me an example of this in real life?

Sure! A classic example is the housing market. If more people want to buy homes (high demand) but there aren't enough houses available (low supply), prices will increase. On the other hand, if there are many houses for sale but fewer buyers, prices will decrease.

How do external factors influence supply and demand?

External factors like economic conditions, consumer preferences, and government policies can significantly influence supply and demand. For instance, a recession may decrease consumer spending, reducing demand and leading to lower prices.

What happens when supply and demand are equal?

When supply and demand are equal, the market is said to be in equilibrium. At this point, the price stabilizes, and there is no inherent pressure for it to change unless external factors come into play.