What is the relationship between demand and price in a market?

In a market context, the relationship between demand and price is such that they move in the same direction. When demand for a good or service increases, buyers are willing to pay more for it, which leads to an increase in price. Conversely, when demand decreases, prices tend to fall since sellers may lower prices to attract buyers. This relationship is fundamental to understanding basic economic principles and is often illustrated through the demand curve, which typically slopes downwards from left to right. As prices rise, generally, the quantity demanded declines; similarly, as prices fall, the quantity demanded increases.

This concept is a key aspect of demand theory and is vital for real estate investment, where understanding how price fluctuations affect buyer interest can significantly influence investment decisions.