Short Answer 
The law of supply states that as prices rise, suppliers increase production, while the law of demand asserts that higher prices lead to decreased consumer demand. The interaction of these two laws creates market equilibrium, helping to predict price and quantity changes in response to market conditions.
Step 1: Understanding the Law of Supply
The law of supply indicates that price and quantity supplied move in the same direction. This means that as the price of goods and services increases, suppliers are motivated to produce more. Key points include:
- Higher prices lead to increased profits.
- Suppliers respond by raising the quantity of goods offered.
- For example, a company will produce more cups if the price of cups rises.
Step 2: Grasping the Law of Demand
In contrast, the law of demand states that price and quantity demanded move in opposite directions. This implies that as prices rise, consumer demand generally falls. Important aspects include:
- Higher prices result in lower demand for products.
- Consumers may substitute expensive items for cheaper alternatives.
- For instance, if pineapple prices increase due to shortages, consumers might choose other fruits instead.
Step 3: Relationship Between Supply and Demand
The interaction of the law of supply and the law of demand establishes market equilibrium. This concept highlights that:
- When supply increases, prices may fall, affecting demand.
- Conversely, higher prices from increased demand can incentivize greater supply.
- Understanding both laws aids in predicting how market changes affect prices and quantities.