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DEFINITION of 'Law Of Supply And Demand'. A theory explaining the interaction between the supply of a resource and the demand for that resource. The law of supply and demand defines the effect that the availability of a particular product and the desire (or demand) for that product has on price. Generally, if there is a low supply and a high demand, the price will be high.
The Law of Demand. Demand, in economic terms, shows how much of a product consumers are willing to purchase, at different price points, during a certain time period. After all, we all have limited resources, and we all have to decide what we're willing and able to purchase â and at what price.