Money & WorkHow it works
How a price emerges without anyone setting it.
If a price is too high, goods sit unsold and sellers lower it. If too low, shelves empty and buyers outbid each other. Somewhere in between lies the point where quantity supplied equals quantity demanded: market equilibrium. When supply or demand shifts, through a crop failure or a trend, the price moves to a new equilibrium.
Useful: When a price rises, ask: less supply or more demand? The answer tells you whether it will stick.
Source: de.wikipedia.org