Market Demand

• Market demand is often represented by a downward-sloping graphical curve, indicating that there is less demand for most goods as their unit price increases, and vice versa. In discussing demand, however, it is important to distinguish between the effect on quantity demanded if the price changes and an underlying shift in demand caused by other factors such as consumer beliefs, preferences, needs and other factors. Shifts in the demand curve are important because anticipating their economic effects can impact the profitability of a particular business.
  
  

Market Price

• In microeconomics, market price is determined by where the demand curve meets the supply curve. Although limited by numerous assumptions about the market and its participants, these graphical models are the standard by which such concepts are developed and expressed. Basically, market prices will fluctuate to capture excess demand and move excess supply until they settle around equilibrium, at which point the amount of a given product in a market equals the amount demanded and consumed by that market.
  
  

Increased Supply

• As aggregate demand increases for a given product, producers will increase their supply available for sale in an effort to meet that new level of demand. Of course, this is not done instantaneously in most markets as it takes time to gather sales data and ramp up production or place new orders to stock store shelves. Nonetheless, in the long run, the invisible hand of the free market will exhibit the natural phenomena of having supply match demand.
  
  

Market Equilibrium

• After a shift in demand (or supply), the market will adjust naturally in an effort to reach equilibrium. It may take some time for new prices for certain goods to stabilize and for the appropriate amount of supply to be provided to the market at its increased levels of demand, but eventually the market will reach equilibrium. At that point, the true amount of the increase in price and increase in quantity due to the shift in demand can be accurately measured.