Microeconomics · Explainer · 4 min · 21.09.2026 10:15
Demand and supply: why a price changes
A price is a signal. When demand rises and supply does not, the signal moves up.
Demand rises when income, tastes, or the price of a substitute changes. Supply changes when cost, technology, or the weather changes.
When both move at once, the direction of the price is unclear. “It got more expensive because demand rose” is a complete answer only if supply stayed the same.
Elasticity says how sensitive quantity is to price. Bread and a holiday do not react in the same way.
