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Demand Theory

Demand Theory

Demand theory is an economic principle relating to the relationship between consumer demand for goods and services and their prices in the market. Demand theory forms the basis for the demand curve, which relates consumer desire to the amount of goods available. As more of a good or service is available, demand drops and so does the equilibrium price.

Demand theory highlights the role that demand plays in price formation, while supply-side theory favors the role of supply in the market.

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