What is 'supply and demand' in terms of economics?

The concept of 'supply and demand' is fundamental in economics and it describes the relationship between the availability of a product (supply) and the desire of consumers to purchase that product (demand). This interaction plays a critical role in determining the price of goods in a market.

When demand for a product increases while the supply remains constant, the price tends to rise as consumers compete for the limited quantity available. Conversely, if the supply of a product exceeds the demand for it, prices may fall as sellers try to entice buyers. This dynamic is essential for understanding how market economies operate, as it explains how prices are set and how resources are allocated efficiently.

By recognizing the relationship between supply and demand, businesses can make informed decisions regarding production, pricing strategies, and inventory management. Thus, option A accurately captures the essence of this concept in economic theory.