Supply and Demand

Supply and demand is the way in which production and sale are discussed within economic theory.

For everything that is bought there had to been a seller and a price Opens in new window. Where many units are sold to many different people, there are usually many sellers and a large number of units sold.

Supply and demand analysis is the way economists discuss how individual prices are determined by the market and what causes those prices to change.

Also part of supply and demand analysis is an explanation of how the volume of sales is determined in the market and how the number of units bought and sold changes over time.

Supply and Demand Analysis

Supply and demand has become something of a formalized clichéd expression which refers to the standard explanation given by economists for how prices are set and volumes determined for any single product.

In the standard analysis, we are dealing with a single product because the aim is to conceptualize how individual prices are determined and what causes the number of units to be sold to be whatever it is.

One might use this kind of analysis with cars and cameras in a superficial way, but since every model of car or camera may have a different price, this standard approach is clearly meant to be taken as metaphorical rather than actual, not a genuine description of the operation of a market.

Cars and cameras do not collectively have a single price. There may be a price for a particular car model at a particular time or place, but there cannot be a price for all cars in general.

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