LeoGlossary: Supply and Demand

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The interaction between the buyer of a resource and the seller of it. Both parties are affected by the price of an item.

Generally, as prices increase, those willing to supply the market grows while demand wanes. The reverse is also considered true.

Thus, we can see in a free market system, price is influenced by the supply and demand of an item. Not only is price affected but so is volume.

Widespread changes in supply and demand will impact economies. Recessions are nothing more than a drop off in aggregate demand across an entire economic system.


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