Editing Supply and demand (section)

{{Short description|Economic model of price determination in a market}}
{{Other uses}}
{{more citations needed|date=January 2021}}
[[File:Supply-demand-equilibrium.svg|thumb|Supply and demand curves with [[economic equilibrium]] of price and quantity sold]]
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[[File:Supply and demand-stacked4.png |thumb|260px|[[Supply chain]] as connected supply and demand curves]]
In [[microeconomics]], '''supply and demand''' is an [[economic model]] of [[price determination]] in a [[Market (economics)|market]]. It postulates that, [[Ceteris_paribus#Applications|holding all else equal]], the [[unit price]] for a particular [[Good (economics)|good]] or other traded item in a [[perfect competition|perfectly competitive market]], will vary until it settles at the [[market clearing|market-clearing price]], where the quantity demanded equals the quantity supplied such that an [[economic equilibrium]] is achieved for price and quantity transacted. The concept of supply and demand forms the theoretical basis of modern economics.  

In situations where a firm has [[market power]], its decision on how much output to bring to market influences the market price, in violation of perfect competition. There, a more complicated model should be used; for example, an [[oligopoly]] or [[product differentiation|differentiated-product]] model. Likewise, where a buyer has market power, models such as [[monopsony]] will be more accurate.  

In [[macroeconomics]], as well, the [[AD–AS model|aggregate demand-aggregate supply model]] has been used to depict how the quantity of [[real GDP|total output]] and the [[aggregate price level]] may be determined in equilibrium.