Final answer:
Supply and demand interact to determine product prices; high demand with low supply raises prices, while excess supply lowers them. Sellers estimate supply based on expected demand at certain prices, which reflects the balance of these economic forces. OD: Sellers supply a certain amount of a product based on how much demand they believe it will have at a particular price.
Step-by-step explanation:
Supply and demand work together to influence the price of a product through a basic principle in economics. When there is a higher demand for a product than the supply, prices tend to rise. Conversely, when the supply exceeds the demand, prices are likely to fall. In a marketplace, sellers try to gauge what amount of a product should be supplied at different prices, based on the anticipated demand. This is known as the Law of Supply. Similarly, consumers react to higher prices by decreasing the amount they demand, under the Law of Demand.
Factors that can affect supply include cost of inputs, productivity, technology, taxes, subsidies, government regulations, and the number of sellers. Competition among multiple businesses marketing similar products can lead to better prices and quality for consumers as each business strives to attract buyers in a competitive market. Thus, the correct understanding of how supply and demand interact is option OD: Sellers supply a certain amount of a product based on how much demand they believe it will have at a particular price.