What Is the Law of Supply and Demand?

By Jeremy Bowman – Updated Apr 17, 2025 at 12:14 PM

Key Points

Supply and demand determine equilibrium prices; high demand or low supply raises prices.
Investing during low demand and high supply periods can lead to cost savings.
Supply-demand principles guide pricing in commodities, stocks, and event tickets.

Most people have heard of the law of supply and demand, but you might not know exactly what it means. Supply and demand are two of the most fundamental concepts in economics, and their interaction is key to determining the price of a product in a free market as well as to understanding the way markets work. Keep reading to learn more about the law of supply and demand and how it applies to everyday decisions.

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Words Supply and Demand on a scale. — Image source: Getty Images

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About the Author

Jeremy Bowman has been a contributing Motley Fool stock market analyst, covering technology, consumer goods, and macroeconomic trends since 2011. Before The Motley Fool, Jeremy was a newspaper reporter, restaurant manager, and English teacher abroad. He holds a bachelor’s degree in English from Colorado College and a master’s degree in business administration from American University. One of his Motley Fool headlines was briefly featured on Late Night with Stephen Colbert.

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Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple. The Motley Fool has a disclosure policy.