What is demand and supply

Having at least a minimal idea of what supply and demand is is essential. Knowing how they can behave depending on different situations, you can easily buy or sell goods at the best prices for you.

The concept of supply and demand

Queries and expectations of buyers create price policy in the market. Thus, the price of the goods is set, which suits both the buyer and the seller (everyone receives their benefit).

Demand is the need for goods at established prices and cash income. Offer is the quantity of goods that are available for sale at a given price. So we are all under the influence of supply and demand on a daily basis.

As an example, the automotive market is considered. Now there is an oversaturation, i.e. supply at times exceeds demand. If a large quantity of the item comes up for sale, it is likely to be sold at a lower price. Therefore, in the market of used cars there is a tendency to decrease prices, because similar goods (for example, cars in the price range 300-600thousand rubles) are enough to sell car used (ie find demand for their supply) the seller starts to lower the price.

Buyers and sellers represent their interests through supply and demand. Knowing how these categories interact, you can always find the benefit of both selling and buying.

This situation can be seen in the new car market, but to a much lesser extent. To maintain sales, dealers hold promotions and give buyers discounts.

Factors influencing supply and demand

What affects customer requests:
1) Advertising.
2) Fashion trends. For example, the car now is not just a means of movement, but a peculiar indicator of social affiliation of its owner, and must meet fashion trends. No wonder automakers began to pay more attention to design.
3) Availability of goods.
4) Value of consumers’ income. The same car market is now developing due to the growth of the solvency of the population and the huge number of credit offers of banks. Most of the car is taken on credit.
5) Utility of the commodity.
6) Prices for interchangeable goods. The buyer always has a choice of which product to purchase. And that choice is based on what is paramount to a person – quality or price.
7) Number of consumers.
8) Seasonality (e.g. summer and winter rubber).

Which may affect supply:
1) Raw materials and materials prices. Agree that if the manufacturer finds a supplier that, through the purchase of large volumes, will give it a discount, the final price of the product will also have a price bar below its competitors. Accordingly, it will be profitable to produce more of this product. Increasing the price of resources, increasing the cost of goods, reduces its supply, as it becomes unprofitable for the seller due to lower markup and, as a direct result, leads to lower profits .

Detailed study of environmental factors allows to make accurate predictions of the behavior of supply and demand, pushes for the creation of new technologies and goods.

2) Taxes and subsidies. High taxes reduce the desire to produce, and various benefits and subsidies can drive supply growth.
3) Number of producers. The more of them — the higher the competition and the greater the supply.
4) Prices of related benefits.

Based on the study of supply and demand, forecasts are created. If you consider all the factors that affect the situation, you will always be the winner by selling or buying any item. Simple truth—the magnitude of demand decreases as the price of the goods increases, and supply, on the contrary, has the reverse trend.

Examining supply and demand gives the manufacturer the answer to the question: what, in what quantity, and at what price to produce in order to make maximum profit?

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