Factors affecting supply and demand

The offer and the demand they are essential in establishing the current market value of a consumer product.

The offer is the quantity of products available for purchase in the market. This means that the less available a product is, the more money the consumer will pay to get it. Demand is roughly the quantity of the product that the public wants to buy. If there is more demand than the manufacturer can support, eventually the value increases. But there are several factors that influence demand and therefore require changes in production to increase or decrease supply.

Supply and demand can affect the price of products or services.

Price changes are a major factor affecting supply and demand. For example, if a product becomes so expensive that the average consumer already feels that it is not worth buying, consequently it loses interest, demand decreases. This leads to cuts in production that we hope will stabilize the price of the good. Lowering the price of a good can increase demand. Consequently, it can produce changes in production, which must increase to keep up with demand.

Fluctuations in people's income and the availability of credit can significantly affect supply and demand. The housing market is an excellent example of this type of effect. In a recession when there are fewer jobs available and there is little money to spend, the price of homes tends to fall. Additionally, the supply of credit may be less due to the poor ability of the average consumer to qualify for a loan. To help stimulate those who can afford to buy, prices drop and lower interest rates seem to help drive sales. When there is an economic boom, unemployment is very low and people are spending money easily, the Price of homes and other major purchases tends to rise and so do rates of interest.

When an alternative product is launched on the market, the strong competition that will occur between the existing product and the new one can cause demand to drop. Many people who may be purchasing the product may choose to purchase the alternative product. This leads to a price war that ultimately lowers the price of the product and may require a cut in supply to match the drop in demand.

Demand rises and falls according to trends in many cases. Only a few things remain a constant need of society. Even food and other necessary goods are not immune to the effects of changing trends (a concept called elasticity of demand). If a lot of attention is paid to the idea that eating quinoa is bad, then it will eventually affect the demand for quinoa. When the focus is on something else, the quinoa market could fall.

Advertisements on television, the Internet and radio have an effect on supply and demand as they make more people aware of the availability of a product. People don't buy what they don't know is for sale. If it is an attractive ad, there is a good chance that the demand will increase and the supply will have to follow suit.

The seasons of the year can drastically affect supply and demand. The supply and demand of games and toys at Christmas picks, and turkey on Thanksgiving Day are classic examples. Fireworks experience a boom on the countries' independence day. Meanwhile, it is difficult to increase the demand for bikinis in July in South America.