Economics Supply and Demand is an economic model of price determination in a market. It explains how the interaction between buyers and sellers determines the quantity of goods being supplied and the prices at which those goods are exchanged. The Supply and Demand model shows us that when demand for a product increases, so does its price — but when there is an abundance of products available and not enough interested buyers, prices fall to attract customers. Ultimately, it’s the market forces of supply and demand that determine the prices of products in an economy.