1. The basis for an economic theory stating that when supply exceeds demand, the market value (price) of a product will drop and when demand exceeds supply, its value will rise. In the financial markets, the relationship between supply and demand is said to be reflected in selling price of a security, derivative, or debt instrument. 2. Real Estate: The appraisal principle that follows the interrelationship of the supply of and demand for real estate. As appraising is based on economic concepts, this principle recognizes that real property is subject to the influences of the marketplace just as is any other commodity.