This chapter explains how markets determine prices through the interaction of supply and demand. It defines key concepts like markets, demand curves, supply curves, and equilibrium. It then describes how prices and quantities change when demand or supply shifts due to various factors like income changes, input price changes, or technological advances. Specifically, it states that a demand increase raises prices and quantities while a supply increase lowers prices and raises quantities. The chapter aims to predict these price and quantity impacts for all possible combinations of demand and supply shifts.