What does the concept of 'supply and demand' refer to in international economics?

The concept of 'supply and demand' is fundamental in economics and refers specifically to the relationship between the availability of a product (supply) and the desire for that product (demand). In the context of international economics, this relationship significantly impacts prices and market dynamics, influencing how goods and services are produced, distributed, and consumed across countries.

When supply increases or demand decreases, prices tend to fall, while a decrease in supply or an increase in demand can drive prices up. This fundamental principle helps explain changes in market behavior and can guide businesses in making strategic decisions regarding production, marketing, and international trade efforts. The equilibrium between supply and demand ultimately determines how resources are allocated within the global market, shaping international economic interactions.

The alternative options focus on different aspects of international economics, such as government policies, trade imbalances, and currency regulations, which, while important, do not directly encapsulate the core concept of supply and demand and its role in determining market prices and interactions globally.