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North Central Indiana | That’s true, low supply/low demand and high supply/high demand can happen. But it doesn’t usually stay in that relationship when talking about commodities. Typically we see those specific instances at the far range of the curves and one or the other will change because of it or there is an alternative that’s come to market that has taken its place and eventually the product dies off. Commodities are fairly interchangeable in use compared to other goods so when one comes down in demand because price is high, something else is taking its place and the supply isn’t replenished as quickly as it would under high prices, which leads to lower prices as it’s not as “in demand”, now you have low demand and lower supply. Demand increases because price comes down relative to it’s replacement product, price increases because of the low supply, supply increases because of the price driven by demand, supply increases because the price is high, demand comes down because the price is high and the rollercoaster begins back where it started. It’s an ebb and flow where supply and demand chase each other on the curve | |
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