The law of supply and 

demand, one of the most basic economic laws, ties into

almost all economic principles in some way. In practice, people's willingness to
supply and demand a good determines the market equilibrium price, or the price
where the quantity of the good that people are willing to supply just equals the
quantity that people demand. However, multiple factors can affect both supply
and demand, causing them to increase or decrease.

Also called a market-clearing price, the equilibrium price is the price at which the

producer can sell all the units he wants to produce and the buyer can buy all the
units he wants.
With an upward sloping supply curve and a downward sloping demand curve it is
easy to visualize that at some point the two will intersect. At this point, the market
price is sufficient to induce suppliers to bring to market that same quantity of
goods that consumers will be willing to pay for at that price. Supply and demand
are balanced, or in equilibrium. The precise price and quantity where this occurs
depends on the shape and position of the respective supply and demand curves,
each of which can be influence.