Supply and Demand Supply and Demand Supply is the amount of goods and services available.
Demand is the amount of goods or services that people want.
In a free competitive market, supply and demand find an optimum balance and an optimum price for each good or service. When there are fewer widgets than people want, some people will pay more to get the ones available. The price rises. As the price rises, it becomes more attractive for other businesses to produce widgets and the supply increases. When there are more widgets produced than there are people willing to pay for them at a given price, the price will drop making widgets attractive to more people.