The basis is that the amount of social labor to produce a certain commodity must be adapted to the social demand for this commodity. The relationship between supply and demand is the unity of opposites between supply and demand. The law of supply and demand is the basic law of supply and demand change.
Extended data
The law of supply and demand has two meanings: first, supply and demand determine prices; Second, price regulates supply and demand. For example, a textile mill expands its production in pursuit of profit. If all textile mills expand their production, once the supply of products exceeds demand, the price will fall. Enterprises will reduce production; When enterprises reduce production, products will be in short supply and prices will rise, so enterprises will increase production.
People regard "fallacy of composition" as a market failure on the grounds that excess products will waste resources. This view is actually a misunderstanding. Yes, the long-term unsalable product is a waste of resources, but it has nothing to do with the fallacy of composition.
According to economic theory, if the price is determined by market supply and demand, and the supply exceeds demand, the product price will fall. As long as the price is low enough, the market will eventually become clear. From this, it can be inferred that if an enterprise's long-term backlog of products causes waste of resources, then it must not be priced according to the law of supply and demand.
Baidu Encyclopedia-Law of Supply and Demand