Published by MBA Skool Team, Last Updated: February 16, 2015
What is Market Dynamics?
Market Dynamics is a basic concept for supply, demand and pricing economic models. When there is continual changes in the supply and demand of a product or a group of products in a given market, the price signals are created. The specific changes in the supply and demand of a product or a group of products forces a corresponding change in other and hence due to these variances the pricing signals are created. Market dynamics describes these dynamic price signals.
In simple words,
Market dynamics determines :
• When price increases, how consumer react
• Supplier’s reaction to the change in demand
• Changes in one supply-demand relationship affects the other product and consumer groups
The relationship between supply and demand is the principle force behind setting prices of goods and services. For example: there is a demand of product X in the market. Hence the price of X increases and the quantity also increases to meet the increasing demand. Hence there is a simultaneous increase in the supply of the product. Product X’s market price should now return to the former level prior to the increase as the supply meets the demand.
A single entity or group does not have a significant effect on the market . It is a result of collective market resources and preferences. In open markets, significant part of market dynamics is beyond the control of group or firm.
Hence, this concludes the definition of Market Dynamics along with its overview.
This article has been researched & authored by the Business Concepts Team. It has been reviewed & published by the MBA Skool Team. The content on MBA Skool has been created for educational & academic purpose only.
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