law of supply and demand
C1formal, academic, business
Definition
Meaning
The fundamental economic principle stating that the price of a good or service is determined by the relationship between its availability (supply) and the level of consumer desire for it (demand).
A general rule describing how market prices are set; when demand for a product increases and supply remains constant, the price tends to rise, and when supply increases and demand remains constant, the price tends to fall.
Linguistics
Semantic Notes
Refers to an abstract economic model; often personified as an impersonal force governing markets ('the law dictates...').
Dialectal Variation
British vs American Usage
Differences
No significant lexical differences. The concept is identical in both varieties.
Connotations
Slightly more likely to be invoked in US discourse as a foundational, almost natural, principle of free-market capitalism.
Frequency
Equally common in economic and business contexts in both varieties.
Vocabulary
Collocations
Grammar
Valency Patterns
The [NOUN PHRASE: law of supply and demand] + [VERB: dictates/determines/governs] + [NOUN PHRASE: the market price].Vocabulary
Synonyms
Neutral
Weak
Vocabulary
Antonyms
Usage
Context Usage
Business
Used to explain pricing strategies, market fluctuations, and investment decisions.
Academic
A core theoretical concept in introductory economics courses and textbooks.
Everyday
Used informally to explain why popular items become expensive or why seasonal produce is cheap.
Technical
A foundational model in microeconomic theory, often expressed graphically with supply and demand curves.
Examples
By Part of Speech
adjective
British English
- The supply-and-demand dynamics were analysed in the report.
American English
- We need to consider the supply and demand factors before launching.
Examples
By CEFR Level
- Prices for strawberries are low in summer. This is the law of supply and demand.
- The price of the new game console went up because of high demand and low supply - it's the law of supply and demand.
- The government's intervention disrupted the natural operation of the law of supply and demand, leading to market distortions and shortages.
Learning
Memory Aids
Mnemonic
Think of a seesaw: SUPPLY on one end, DEMAND on the other. The LAW is the invisible hand that balances their levels to set the PRICE in the middle.
Conceptual Metaphor
THE MARKET IS A PHYSICAL SYSTEM (with forces, equilibrium, and laws of motion).
Watch out
Common Pitfalls
Translation Traps (for Russian speakers)
- Avoid a word-for-word translation that implies a legislative 'law' (закон) in the legal sense. The economic 'law' (закономерность) is a principle or regularity.
Common Mistakes
- Incorrect article use: *'a law of supply and demand' (usually used with 'the').
- Reversing the terms: *'law of demand and supply' (standard order is 'supply and demand').
Practice
Quiz
Which of the following best describes a situation governed by the law of supply and demand?
FAQ
Frequently Asked Questions
It is a reliable model for competitive markets, but it can be influenced by external factors like government regulation, monopolies, or significant changes in consumer preferences.
Yes. High supply and high demand can exist together, resulting in a stable, moderate price if they are balanced. The law describes the relationship between changes in supply/demand and the resulting price change.
'Supply' refers to the overall relationship between price and the total amount producers are willing to sell (the supply curve). 'Quantity supplied' refers to the specific amount producers are willing to sell at a particular price.
Yes, it does. Wages (the price of labour) are influenced by the supply of workers with certain skills and the demand from employers for those skills.