What impact does supply have on market prices?

The relationship between supply and market prices is a fundamental concept in economics. When supply is high, particularly in a competitive market, it typically leads to a decrease in market prices. This phenomenon occurs because an abundance of goods or services often results in sellers lowering their prices to attract buyers, thereby preventing excess inventory and fostering sales.

Conversely, when supply is low, market prices tend to increase due to scarcity. Sellers can demand higher prices because consumers are competing to purchase limited goods, which often drives up prices.

Therefore, understanding that high supply generally puts downward pressure on prices is essential. This inverse relationship illustrates how supply directly impacts the affordability and availability of goods in the market, shaping consumer behavior and business strategies.