From NCERTAsked by Anonymous from New York, United States24 Oct 2026, 9:37 AM ISTUpdated
In one line
When demand is more than supply, prices usually go up.
Onion — Bulbous vegetable Onion prices in India often rise when demand is more than supply, like after a bad monsoon. Image: Wikipedia
The rule
When the quantity demanded (demand) is greater than the quantity supplied (supply), there is a shortage, and prices tend to rise until supply and demand balance.
Formulas:
Qd = f(P) (Quantity demanded depends on price)
Qs = f(P) (Quantity supplied depends on price)
At equilibrium: Qd = Qs
Let's understand it simply
Imagine you are at a cricket match, and there are only 100 tickets. But 200 people want to watch the match. This means demand (people wanting tickets) is more than supply (tickets available). Some people will not get tickets. The seller may notice this and raise the ticket price, because people are willing to pay more to get in. This is what happens in any market when demand is more than supply.
How it works
Many people want a product (high demand).
There is not enough of the product for everyone (low supply).
Some people are willing to pay more to get the product.
Sellers notice this and increase the price.
As price rises, some buyers drop out (cannot afford it), and some sellers may bring more products to sell.
This continues until the number of buyers equals the number of items (demand equals supply).
What happens when demand is more than supply?
Many buyers want the product
Not enough product for everyone
Sellers raise prices
Some buyers drop out
Supply and demand balance at a new price
The story behind it
The idea of supply and demand has been around for centuries, but it was clearly explained by economists like Adam Smith in the 1700s. They wanted to understand why prices change in markets. The famous book "The Wealth of Nations" (1776) discussed how buyers and sellers together set prices, not just kings or governments.
Where you see it in real life
Onion prices in the market: If a bad monsoon ruins the onion crop, there are fewer onions (low supply), but people still need them (high demand), so prices rise.
Diwali crackers: Just before Diwali, everyone wants crackers (high demand), but shops have only so many (limited supply), so prices shoot up.
Bus tickets during festivals: More people travel home (high demand), but the number of buses is the same (fixed supply), so ticket prices increase.
Mobile phones after a new launch: A new phone comes out, everyone wants it (high demand), but only a few are available at first (low supply), so prices can be high.
Why it matters
Helps us understand why prices go up or down in the market.
Important for farmers, shopkeepers, and businesses to decide how much to produce or sell.
Used in exams and higher studies to explain market behavior.
Helps the government plan for shortages or surpluses (like food grains).
Common mistakes
Thinking prices always stay the same when demand is more than supply. (In reality, prices usually rise.)
Believing everyone will get the product if they want it. (Some people miss out or pay more.)
Forgetting that supply can change too—if prices rise, more sellers may enter the market.
Remember it
When more people want something than is available, prices go up until things balance.
Check yourself
If 100 people want apples but only 50 apples are in the market, what will likely happen to the price?
The price will go up because demand is more than supply.
Why do bus ticket prices rise during festivals?
Because more people want tickets (high demand) than there are seats (limited supply).
What happens to the price when supply increases but demand stays the same?
The price usually goes down because there are more products than buyers.
Quick recap
When demand is more than supply, prices usually rise.
This creates a shortage—some people cannot buy the product.
Higher prices may attract more sellers or reduce the number of buyers.
