What are the most fundamental concepts of economics?
Supply and demand are perhaps one of the most fundamental concepts of economics and it is the main backbone of the economy. The use of the word demand refers to how much of a product or service is desired by buyers/consumers. The quantity in which is demanded is the amount of a product that people are willing to buy at the price that is charged. The price that is set must be at an affordable amount which reflects the quality of the product. The relationship between price and quantity is known as the demand relationship.
Supply represents how much the market can offer. The quantity supplied refers to the amount of certain good producers are willing to supply for the price that has been set to make the products. The link between price and how much of a good or service is supplied to the market is known as the supply relationship. Price is, therefore, a reflection of supply and demand. The relationship between demand and supply show the forces behind the allocation of resources. In market economy theories, demand and supply theory will allocate resources in the most efficient way possible however mistakes can be made within this demand and supply theory.