One of the most important concepts in economics is supply and demand, which is the main support of a market economy. The relationship between these two factors makes it possible to define the allocation of resources in the most efficient way possible. The demand for a product or service represents the quantity desired by buyers. In other words, demand is the quantity of a product or service that people want to buy at a certain price. The law of demand states that, if all other factors do not change, the higher the price of a product, the less buyers will demand it. This happens because as the price increases, the opportunity cost of purchasing that product also increases. Therefore, people would avoid purchasing something that would require them to give up something else that they value more. However, there are other factors beyond price that determine demand in a market, such as consumer income, tastes and fashions, price of alternative and/or complementary goods, socio-cultural factors, among others . The relationship between price and quantity demanded is known as the demand relationship, which is illustrated in the diagram, where the demand curve is a downward slope. As we can see, there are two examples of price and demand. The first example shows that at price P1 (smaller price), the quantity demanded would be equivalent to Q1 (larger quantity), while at price P2 (higher price), the quantity demanded would be Q2 (smaller quantity) . On the other hand, supply refers to the market's ability to offer the product or service at a given price. This means that the higher the price, the greater the quantity supplied, as producers aim to supply more at higher prices in order to increase their income and expand their production. In the supply diagram, the slope goes up......middle of paper......less supply, leading some producers to keep their goods, unable to sell them. Therefore, producers tend to reduce their prices in order to make their product more attractive and remain competitive in the market. In response to falling prices, demand will increase, driving the market toward equilibrium. Unlike surplus, there is a shortage, which refers to excess demand. The shortage prevents consumers from purchasing as many goods as they would like. Therefore, producers will increase both the price of their product as well as the quantity they wish to supply. Therefore, the price increase could be very significant for some people and they will no longer ask for the product. On the other hand, the increased quantity of products available could satisfy other consumers, where equilibrium would eventually be reached..