Market dynamics

Market dynamics refers to price changes on the market. The supply and demand changes over time. That results in price changes. The market dynamics shows the direction and importance of changes in the price.

Market dynamics examples

Let's consider two simple combinations on the competitive market:

  1. supply is stable, demand grows
    • first: price increases, trade becomes more profitable for suppliers
    • then suppliers increases supply to earn more
    • the price declines and finds the new equilibrium
  • supply is stable, demand drops
    • first: price declines, trade becomes less profitable for suppliers
    • then suppliers decrease supply
    • the price increases and finds the new equilibrium

References

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