Supply and demand

Demand is the amount of a good that consumers are willing and able to buy at a given price. Supply is the amount of a good producers are able to sell at a given price.

Supply influences demand and demand influences supply in mixed or market economies. If there is a strong demand for Nike trainers then Nike will produce more trainers to sell. Both demand and supply will go up. However, if Nike increases the price of the trainers too much or changes to an unpopular design then the demand for Nike trainers falls. This means Nike will make fewer trainers.

Alternatively, if a competitor makes similar trainers and sells them at half the price, Nike will lose customers as some people will change their loyalty. Companies need to be aware of the alternative products that are being sold and their prices.