What primary factor determines prices in an economy according to the concept of supply and demand?

The primary factor that determines prices in an economy according to the concept of supply and demand is supply levels. This principle is fundamentally based on the relationship between how much of a good or service is available (supply) and how many consumers want to purchase it (demand).

When supply levels increase, usually prices tend to decrease, assuming demand stays constant. Conversely, if supply levels decrease while demand remains the same or increases, prices generally rise. This interaction helps to establish equilibrium prices in the market, where the amount supplied equals the amount demanded.

While government regulation, the number of consumers, and competition among businesses can all influence prices, they are not the primary factors according to the basic tenets of supply and demand. Supply levels directly affect market dynamics by establishing how much of a product is available to meet consumer needs, making it the key determinant of price in an economy.