What is the law of "supply and demand"?

Supply and demand describes how prices form from the interaction between how much of something is available and how much people want it. When demand for a scarce item is high, buyers compete for the limited supply, pushing prices up, while when something is abundant or few people want it, sellers must lower prices to attract buyers, and markets continually adjust as the two forces shift.

Governments sometimes intervene with price controls or subsidies, but that isn't what this law itself describes; it explains how prices naturally form rather than describing government price-setting. A tariff is a specific tax on imported goods, a distinct policy tool rather than the general market principle here.

Prices can shift dramatically due to unexpected events, such as a natural disaster disrupting a crop or a sudden trend making a product wildly popular, which is why prices for the same item can swing sharply even without any change in its underlying production cost.