Definition
Demand reflects how much consumers are willing to buy at different prices, while supply reflects how much producers are willing to sell.
Political Dictionary
Supply and Demand
Supply and demand describe how buyers and sellers influence prices and quantities.
Why It Matters
The framework helps explain markets, shortages, surpluses, prices, and policy effects.
How It Works
Market prices adjust as supply or demand changes, moving toward an equilibrium under simplified conditions.
History
The concepts became central to classical and neoclassical economics.
Example
A poor harvest reduces supply and may raise food prices.
Common Misconceptions
- Supply and demand guarantee perfectly fair outcomes.
- Demand means need rather than willingness and ability to buy.
- Prices are determined by only one side of the market.
Related Terms
- Fiscal Policy
- Monetary Policy
- Inflation
- Economic Growth
- Government Spending
Related Topics
See Also