Buyers and sellers make the market. Buyers are the agents that desire resources. Sellers are the agents that provide resources. The place where they come to negotiate is called market .The interaction in the market determine the demand and supply of a product.
Demand:
Buyers want to pay as little as they can.
So we have to assume that a greater quantity would be demanded of a product when the price falls down .
Hence the demand is a downward sloping curve.
Quantity demand of a product increases when more product is bought at lower prices .
Demand law :
Quantity demand of a product decreases when less product is bought at Higher prices.
Supply:
Sellers want to charge as much as possible . So we have to assume that a greater quantity would be supplied when the price rises .
So the supply is upwards sloping curve .
When a low quantity of product is sold at a low price quantity supply decreases.
Supply law:
When a large quantity of product is sold at a high price ,quantity supplied increases.
Price determination:
Market price of a product is determined by trial and error.
Hence if the price is set too high quantity supplied will exceed the quantity demanded it is called "surplus" or "excess surplus".
If the price is set too low the quantity will exceed the quantity supplied the resulting gap is known as "shortage" or "excess demand" therefore when the supply and demand of a product is equal , the market is said to be cleared.
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