Relationship between price and supply and demand

Price and supply and demand are two-way constraints, and supply and demand determine the price of commodities: when supply exceeds demand, commodity prices will fall; When demand exceeds supply, commodity prices will rise. In addition, price will also restrict the relationship between supply and demand: when the price is higher than the value, producers will expand production, increase supply, and at the same time demand will decrease; When the price is lower than the value, producers will reduce production and supply, and at the same time, demand will increase.

In the real world, when the price is high, it must correspond to less supply; when the price is low, it must correspond to more supply. High prices will inevitably lead to an increase in supply, which usually leads to a decline in prices, but as long as the price decline is not very large, it will still increase supply. When the supply increases too much, the price will become very low. At this time, the supply will decrease. If the supply decreases little, the price will not increase much. Supply will continue to decrease and prices will continue to rise. The interaction between supply and price leads to different prices and supply in different periods.

Types of market supply and demand

1. Demand exceeds supply. Refers to the goods produced by the production department in the market in a certain period of time, that is, the total amount of goods provided for people's consumption is less than the total amount of products needed by (backward) people to meet their material life during this period. In this case, demand exceeds supply, and then the market becomes a seller's market, and the seller is in a favorable position.

2. Demand exceeds supply. It means that in a certain period of time, the total amount of goods produced by the production department in the market, that is, the total amount of goods provided for people's consumption, is greater than (exceeds) the total amount of products needed by people to meet material needs during this period of time. This makes the supply exceed the demand, at this time, the market becomes the buyer's market, and the buyer is in the active position.

3. Balance between supply and demand. It means that in a certain period of time, the supply of goods and people's needs have reached an ideal state of equivalence, that is, the supply just meets the demand. This balance is only a trend, and it can only be a relative balance, which needs to be realized under strict assumptions. In this case, the buyer and the seller are in a mutually beneficial relationship, and their relationship is relatively harmonious and stable.