The relationship between market supply and demand and price, first of all, is that market value or production price determines price, which is the internal basis and entity of price formation and movement and the center of market price fluctuation. Price regulates the relationship between market supply and demand, and the relationship between market supply and demand reacts on price, which becomes the basic factor that dominates or affects the formation and movement of market price. Therefore, they influence and restrict each other.

If the price of a commodity increases by 1% and the demand decreases by 2%, the price elasticity of the demand for the commodity is -2. Because the direction of demand change is always opposite to the direction of price change, the elasticity coefficient of demand price is negative. However, for the convenience of use, the negative sign is generally omitted and expressed by its absolute value.

Extended data:

According to the analysis of supply and demand, the two pressures are analyzed in turn, and then they converge to determine the market equilibrium price and output. In environmental economy, the common supply and demand analysis includes the supply and demand analysis of environmental quality goods and the determination of the number of products of industries or enterprises with external diseconomy.

The former needs to use the willingness to pay method or the willingness to sell method to determine its demand in the imaginary "market" of environmental quality public goods, while the latter needs industries or enterprises to internalize external diseconomy in order to obtain the best allocation of social resources.

Baidu encyclopedia-supply and demand