Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : MDA - Market Direction Analysis -- Ignore unavailable to you. Want to Upgrade?

To: DukeCrow who wrote (71584)	3/9/2001 11:31:10 PM
From: Estimated Prophet	Read Replies (1) \| Respond to of 99985

No, but the reduction in demand has to begin somewhere, and it cascades. Remember that demand is usually elastic in free markets. So is supply. They are not static figures, they are ranges of prices and quantities which have a relationship to each other. Price is the important signal, and a supply curve with "too many" of widgets at a given price signals that a widget can be obtained at a lower price. The relationship is a differential--the willingness of a buyer to buy at the price is dependent on the differential of cost for the producer, and the willingness of the producer to produce is dependent on the differential of the quantity needed by the buyer. And on the differential ie marginal cost of production for the producer and the marginal demand of the buyer. Seller gets an excess inventory. Buyer sees he may not have to buy at the current price. Buyer willing to wait to buy. Demand goes down. Fewer willing buyers at the current price. Seller now faces a demand curve that has dropped down a notch on the y-axis. Excess supply has caused decreased demand. It is a dislocation, not a permanent condition, but the market for widgets is now in an unstable condition until the demand and supply curves find a new equilibrium. Make sense?