Question

How supply and demand work together to reach the equilibrium price in the marketplace? Please give at least a paragraph. Thank you!

Answer 1

Answer/Explanation

Supply and demand is one of the most basic and fundamental concepts of ... the most basic and fundamental concepts of economics and of a market economy. ... then become too expensive, demand will go down at that price and the price ... These are examples of how the law of supply and demand works in the real world.

Answer 2

Before I answer this question, you must note that the equilibrium price is created by both the amount supplied of a certain product as well as how much "customers" there are (or the amount that is bought in all). This however, is usually not taking account any potential competitors.

For example, let say that the price in creating the product (or buying) is $15. This means that right now, the company loses $15 for one of the products. To make a profit, the selling price must be >$15. However, (unless they are a monopoly, such as, for example, electrical companies) there are competitors that they must fight with to get customers. Of course, there are other things that can affect the price, depending on the demographic and area.

So how does supply and demand affect the equilibrium price? The limits of the supply & the amount of demand would help determine the price by the amount of people buying and the supply of the product.

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