supply and demand, law of

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supply and demand, law of Economic balance between goods required and produced. The law of supply indicates that, other things being equal, as the price of an item increases, suppliers are willing to produce more, and as the price decreases producers are willing to produce less. Thus, price and quantity supplied are directly related. The law of demand states the reverse: as prices increase, consumers demand less, and as prices decrease, consumers demand more. Thus, prices and quantity demanded are inversely related.

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