Supply and demand

In short: On markets, supply (what sellers want to sell) and demand (what buyers want) determine the price. Where the two meet lies the equilibrium price.

In more detail: When the price rises, usually fewer people buy, while sellers like to produce more. The market settles accordingly.

In detail

• Demand curve: Falls as the price rises.
• Supply curve: Rises as the price rises.
• Equilibrium: The quantity buyers want equals the quantity offered.
• Shifts: Fashion, income or weather shift demand; costs and technology shift supply.
• Scarcity: When supply is small, the price rises (e.g. concert tickets).
• Price elasticity: Necessities like bread barely react to price changes.
• Limits: Monopolies and regulation disturb the mechanism (monopol-oligopol-und-wettbewerb).