What concept involves the relationship between supply and demand?

The concept that involves the relationship between supply and demand is microeconomics. This field of economics focuses specifically on individual consumers and businesses, examining how they make decisions regarding the allocation of resources and how these decisions influence supply and demand in the market.

In microeconomics, the interaction between supply and demand determines the prices of goods and services, as well as the quantity produced and consumed. When demand for a product increases, typically, this leads to higher prices if supply remains constant. Conversely, if supply increases while demand remains constant, prices tend to fall. Understanding these concepts helps analyze how various factors can impact the behavior of smaller economic units, such as households and firms.

While macroeconomics deals with larger economic factors such as overall national economic growth, inflation, and unemployment, and monetary and fiscal policies are broader governmental strategies aimed at influencing the economy, the specifics of supply and demand are essential components within the microeconomic framework.