Even the smallest of businesses are affected by the law of supply and demand. This may sound like crazy talk, but in the end all businesses are affected in one way or another by these laws. Some are a little more obvious than others. One of the biggest examples of this is when Christmas time rolls around; we will use this holiday to demonstrate this at work.
Lets look at the first aspect of the equation, there is always a quantity of something, whether it is food, or a electronic, the public always has a surplus of an item. Stores are a part of the chain of amount versus request. The way this is true, is that of the store needing a particular item, this is desire to purchase the item, the place that supplies it is known as the supplier. The supplier has to be supplied the item from the person that produces it, this is known as the manufacturer.
The need to purchase comes from the fact that the supplier needs a certain amount to ship to other locations that are demanding the item. This request is being driven by the public’s need for the item in question. This is the end of the production versus the purchase chain. This sounds rather easy; the difficult part becomes the prices.
The price being shot up is in response to the overwhelming desire to buy that the public has had for the toy. When it was sitting on shelves collecting dust the amount available was high with a low request for said item, this drove the prices down a lot, the best solution though is to have a constant inventory and high request for said item, to keep the price stable and not get overly outrageous.
Stores have to adjust the price on a regular basis depending on the current production and request cycle; the price can even change in a day from being low, to being high to being low again. If you need proof of this, then look at the gas prices as compared to ten years ago. There is a greater desire to purchase then there is a amount able to be bought, this is why gas prices are all the time high.
The more that you understand about the theory of made versus request, then the better informed you will be. This can assist you down the road, as you will be able to look at your friends and impress them by explaining the logic behind the insane prices for an item.
The next time that you find yourself in a discussion about the law of supply and demand, you now have more knowledge that will allow you the chance to talk about it and know what you are talking about.
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