Page "Microeconomics" Paragraph 4

The theory of supply and demand usually assumes that markets are perfectly competitive.

This implies that there are many buyers and sellers in the market and none of them have the capacity to significantly influence prices of goods and services.

In many real-life transactions, the assumption fails because some individual buyers or sellers have the ability to influence prices.

Quite often, a sophisticated analysis is required to understand the demand-supply equation of a good model.

However, the theory works well in situations meeting these assumptions.