Supply is the amount of something that is available 
Demand is how much of that thing people want to buy 

And the paragraph: 

It's saying that competition makes it so that prices are as low as possible. The best part of a market economy is that prices change when supply and demand change. People can decide what they want to make, who they want to make it for, and how much they want to make, because it isn't controlled by the state. If something is too expensive, nobody will buy it, so the person who made it will have to lower the price. 
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The supply and demand is directly proportionate and when supply increases and is more than the demand the price comes down if the supply is short the demand is high the price goes up.If the supply of the product is consistent in the market it will have a stable price.If the demand is heavy some times they wantedly hoard the products especially in fiid grains to make an artificial increase in price and make additional profit.

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