The Law Of Supply And Demand: What Is It And How Does It Work?

In general, the law of supply and demand means the more demand there is for a product by consumers, the higher the supply will be from producers. This relationship can also dramatically affect the price of a product or service. For example, if there’s a huge demand for a certain type of gaming system but there are only a few in circulation, then chances are that particular gaming system will have a higher-than-normal price tag. In other words, high demand with a low supply often equals a high(er) price for the item.


On the flip side, if you have a high supply of a niche item like a fidget spinner, which is available in plenty of stores with no real demand by consumers to buy it, then you might see a low or discounted price attached to it. Or, high supply with low demand often equals low(er) prices.

Factors that could affect the supply and demand of an item could be found along the supply chain. If there’s plenty of demand for an item, it could take a little longer to mass produce that item and have it ready for the consumer to buy. You might have seen some of this correlation in your own supermarket over the years, depending on what was in demand at a particular time (e.g., avocados or cream cheese) and how much of a supply there was to meet it.