The law of demand states that quantity demanded rises as price falls, other things constant.
The law of supply states that quantity supplied rises as price rises, other things constant.
Factors that affect supply and demand other than price are called shift factors. Shift factors of demand include income, prices of other goods, tastes, expectations, and taxes on and subsidies to consumers. Shift factors of supply include the price of inputs, technology, expectations, and taxes on and subsidies to producers.
A change in quantity demanded (supplied) is a movement along the demand (supply) curve. A change in demand (supply) is a shift of the entire demand (supply) curve.
The laws of supply and demand hold true because individuals can substitute.
A market demand (supply) curve is the horizontal sum of all individual demand (supply) curves.
When quantity supplied equals quantity demanded, prices have no tendency to change. This is equilibrium.
When quantity demanded is greater than quantity supplied, prices tend to rise. When quantity supplied is greater than quantity demanded, prices tend to fall.
When the demand curve shifts to the right (left), equilibrium price rises (declines) and equilibrium quantity rises (falls).
When the supply curve shifts to the right (left), equilibrium price declines (rises) and equilibrium quantity rises (falls).
In the real world, you must add political and social forces to the supply/demand model. When you do, equilibrium is likely not going to be where quantity demanded equals quantity supplied.
In macro, small side effects that can be assumed away in micro are multiplied enormously and can significantly change the results. To ignore them is to fall into the fallacy of composition.
