Supply and demand is the heart of economics. It’s essential for understanding nearly everything economists care about. Market prices and quantities, industry revenue, the distribution of income, the effects of tariffs–it all depends on supply and demand.
The usefulness of supply and demand is most obvious in the case of microeconomics, which focuses on households and firms. But it’s just as handy for macroeconomics in studying economy-wide phenomena like growth and business cycles. Let’s use supply and demand to explain inflation, the current hot topic in economics.