The Law of Supply and Demand states that the supply and demand for goods and services dictate their price in a free market economy. When supply is high, prices tend to be lower, as more goods are available. Supply can be affected by factors such as production capacity, cost of inputs, availability of raw materials, and government intervention. On the other hand, demand is determined by how many people want or need whatever good or service is being sold—factors such as consumer tastes and preferences, income levels, population growth, and consumer confidence all contribute to demand. When supply and demand meet at an equilibrium point where they’re both equal, the price will remain stable. Fluctuations in supply and demand can lead to changes in the price of a good or service. As such, the law of supply and demand serves as an important economic principle that helps to regulate the markets and create an efficient allocation of resources.