What factors directly affect the price of goods and services?

The price of goods and services is directly influenced by the fundamental economic concept of supply and demand. When demand for a product increases, and the supply remains the same or decreases, prices tend to rise. Conversely, if the supply of a product increases while demand remains constant or decreases, prices tend to fall.

This relationship illustrates the balance between how much of a good or service is available (supply) and how much consumers want it (demand). When demand outstrips supply, scarcity can lead to higher prices as consumers compete for limited resources. In contrast, when there is an oversupply and not enough demand, prices will decrease, helping to clear the excess stock.

While economic policies, consumer preferences, and marketing strategies can influence market behaviors and perceptions, they do not change the underlying mechanics of how supply and demand dictate price formation in a marketplace. Understanding this connection is essential for grasping how prices fluctuate based on economic conditions and consumer behavior.