Final answer:
The law of supply and demand explains how the balance between supply and demand impacts prices in the market.
Explanation:
The law of supply and demand shows the relationship between the availability of a good or service and the desire for it in the market. When there is more supply than demand, prices tend to decrease as producers may need to lower prices to sell excess inventory. Conversely, when there is more demand than supply, prices usually increase due to scarcity, encouraging suppliers to produce more to meet the demand.
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