The Demand And Supply Law states that in any given market, the price of goods and services is determined by the balance between how much people are willing to pay for them (demand) versus how much businesses can produce or sell at a certain price point (supply). When there is an increased demand for certain goods or services, the prices will increase. Conversely, when supply outweighs demand, prices drop. This law has been used to explain the pricing of goods and services since economic theory was first formulated.