The study of supply and demand allows the buyer to purchase the goods at the lowest price, which can be formed under the influence of various factors, and the seller to sell his goods with the greatest benefit.
It is extremely important to have at least a minimal understanding of what supply and demand is. Knowing how they can behave, depending on the various situations that have developed, you can easily buy or sell goods at the most favorable prices for you.
Supply and demand concept
The demands and expectations of buyers create a pricing policy in the market. Thus, such a price for the goods is established, which suits both the buyer and the seller (each gets his own benefit).
Demand is the need for goods at prevailing prices and monetary incomes. An offer is the number of items available for sale at a given price. Thus, we are all influenced by supply and demand on a daily basis.
Consider the automotive market as an example. Now there is oversaturation, i.e. supply is many times higher than demand. If there is a large quantity of a product for sale, it is likely to be sold at a lower price. Therefore, on the used car market, there is a downward trend in prices. There is a lot of similar goods (for example, cars in the price range of 300-600 thousand rubles), and in order to sell a used car (i.e. to find demand for their supply), the seller begins to reduce the price.
Buyers and sellers represent their interests through supply and demand. Knowing how these categories interact, you can always find benefits from both selling and buying.
This situation can be traced in the new car market, but to a much lesser extent. To maintain sales, dealers hold promotions and provide discounts to buyers.
Factors affecting supply and demand
What affects buyers' requests:
1) Advertising.
2) Fashion trends. For example, a car is now not just a means of transportation, but a kind of indicator of the social belonging of its owner, and must meet fashion trends. No wonder automakers have begun to pay more attention to design.
3) Availability of goods.
4) The amount of consumer income. The same car market is now developing due to the growth of the population's solvency and a huge number of loan offers from banks. Most of the cars are borrowed.
5) The usefulness of the product.
6) Prices for interchangeable goods. The buyer always has a choice of which product to buy. And this choice is based on what is paramount for a person - quality or price.
7) The number of consumers.
8) Seasonality (eg summer and winter tires).
What can influence the offer:
1) Prices for raw materials and supplies. Agree that if a manufacturer finds a supplier who, due to the purchase of large volumes, provides him with a discount, the final price of the product will also have a price bar lower than its competitors. Accordingly, it will be profitable to produce more of this product. The rise in prices for resources, increasing the cost of goods, reduces its supply, since it becomes unprofitable for the seller due to a decrease in the margin and, as a direct result, leads to a decrease in profits.
A detailed study of environmental factors makes it possible to make accurate forecasts of the behavior of supply and demand, and pushes for the creation of new technologies and goods.
2) Taxes and subsidies. High taxes reduce the desire to produce, and various incentives and subsidies can stimulate supply growth.
3) The number of producers. The more there are, the higher the competition and the greater the supply.
4) Prices of related goods.
Based on the study of supply and demand, forecasts are created. If you take into account all the factors affecting the current situation, you will always be a winner when selling or buying a product. The simple truth is that the amount of demand decreases as the price of the product increases, while supply, on the contrary, has the opposite tendency.
The study of supply and demand gives the manufacturer the answer to the question: what, in what quantity and at what price to produce in order to get the maximum profit?
