law of supply and demand

  

Definition

The common sense principle that defines the generally observed relationship between demand, supply, and prices: as demand increases the price goes up, which attracts new suppliers who increase the supply bringing the price back to normal. However, in the marketing of high price (prestige) goods, such as perfumes, jewelry, watches, cars, liquor, a low price may be associated with low quality, and may reduce demand.

Use this term in a sentence

  • Knowing how to accurately predict the law of supply and demand should have you maximizing your profit potential at all times.

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  • I studied the law of supply and demand in school and was really interested in how the marketplace worked and how goods were sold.

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  • You must make sure that your factory can keep up with the law of supply and demand when your product is hot.

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