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supply and demand

In classical economic theory, the relation between these two factors determines the price of a commodity. This relationship is thought to be the driving force in a free market. As demand for an item increases, prices rise. When manufacturers respond to the price increase by producing a larger supply of that item, this increases competition and drives the price down. Modern economic theory proposes that many other factors affect price, including government regulations, monopolies, and modern techniques of marketing and advertising.

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The New Dictionary of Cultural Literacy, Third Edition Copyright © 2005 by Houghton Mifflin Harcourt Publishing Company. Published by Houghton Mifflin Harcourt Publishing Company. All rights reserved.

Examples from the Web for supply and demand

Historical Examples

  • Laissez-faire, Supply-and-demand,—one begins to be weary of all that.

    Past and Present

    Thomas Carlyle

  • Supply-and-demand is not the one Law of Nature; Cash-payment is not the sole nexus of man with man,—how far from it!

    Past and Present

    Thomas Carlyle