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Supply and demand

supply and demand definition

In classical economic theory, the relation between these two factors determines the price of a commodity. This relationship is thought to be the driving force in a free market. As demand for an item increases, prices rise. When manufacturers respond to the price increase by producing a larger supply of that item, this increases competition and drives the price down. Modern economic theory proposes that many other factors affect price, including government regulations, monopolies, and modern techniques of marketing and advertising.


Read Also:

  • Supplying

    verb (used with object), supplied, supplying. 1. to furnish or provide (a person, establishment, place, etc.) with what is lacking or requisite: to supply someone clothing; to supply a community with electricity. 2. to furnish or provide (something wanting or requisite): to supply electricity to a community. 3. to make up, compensate for, or satisfy […]

  • Supply-side

    adjective, Economics. 1. of or relating to a theory that stresses the reduction of taxes, especially for those of higher income, as a means of encouraging business investment and growth and stabilizing the economy.

  • Supply-side economics

    noun 1. (functioning as sing) a school of economic thought that emphasizes the importance to a strong economy of policies that remove impediments to supply supply-side economics definition An economic theory that holds that, by lowering taxes on corporations, government can stimulate investment in industry and thereby raise production, which will, in turn, bring down […]

  • Supply-sider

    [suh-plahy-sahy-der] /səˈplaɪˌsaɪ dər/ noun 1. a person, especially an economist, who advocates supply-side economics.

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