What is market dynamics?
Market dynamics refer to price changes in the market. supply and demand change over time. This leads to price changes. The market dynamics shows the direction and importance of price changes.
Market dynamics examples
Let's consider two simple combinations in the competitive market:
Supply is stable, demand is growing
- First: price increases, trading becomes more profitable for suppliers
- Then suppliers increase supply in order to earn more
- the price goes down and finds the new equilibrium
the supply is stable, the demand is falling
- First: the price falls, the trade becomes less profitable for the suppliers
- then suppliers reduce the supply
- the price rises and finds the new equilibrium