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How do supply and demand affect each other?
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Supply and demand affect each other through the
law of supply and demand
. This law says that when the price of a product goes up, the quantity supplied goes up and the quantity demanded goes down. And when the price of a product goes down, the quantity supplied goes down and the quantity demanded goes up.
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This makes sense because when the price of a product is high, producers want to make more of it to earn more money, but consumers want to buy less of it because it is too expensive. And when the price of a product is low, producers want to make less of it because they earn less money, but consumers want to buy more of it because it is cheap.
- You can see this relationship in a graph called a supply and demand curve . The supply curve shows how much producers are willing to sell at different prices. The demand curve shows how much consumers are willing to buy at different prices. The point where the two curves meet is called the equilibrium point . This is where the price and quantity are balanced.
