Supply and demand coordinate to determine prices by working together. When the demand for a product or service increases, but the supply remains constant, prices tend to rise. On the other hand, if the supply of a product increases significantly while the demand stays the same, prices are likely to fall.
In a competitive market, the forces of supply and demand interact to establish equilibrium prices. This means that prices adjust until the quantity supplied equals the quantity demanded. If prices are too high, demand may decrease, leading to a surplus; if prices are too low, demand may increase, causing a shortage.
Factors such as production costs, technology, government regulations, and consumer preferences can also influence prices, but ultimately, it is the dynamic interplay between supply and demand that primarily determines prices in a market economy.
