Law of supply and demand

The Law of supply and demand describes how prices are related to the number of things made available (supply), and the number of things people want (demand).

If the demand goes up (people want more) or the supply goes down (sellers have less of something) then the price will go up. This happens because the suppliers will raise the price when running out of items to earn as much money as possible since people are willing to pay more.

If the demand goes down (people want less) or the supply goes up (suppliers have more of something) then the price will go down. This happens because the suppliers would rather lower the price than have many unsold items. Usually there are multiple suppliers of the same item. The buyers will buy more from the supplier with the lowest price. The suppliers will lower the price so people will buy from them instead of from another supplier.

Sometimes there is only one supplier (a monopoly). When this happens, the supplier chooses the price and the demand only determines how much is bought. The supplier will probably raise the price very high as long as people are still willing to buy at that price.