Market dynamics is a phenomenon that is given great importance in economics especially when it comes to supply and demand concepts or in the pricing of goods and services. What market dynamics basically means is the trend or the changes in the prices of various products and these changes in the prices are estimated with the help of the probable supply and demand of those products in the future.
Fluctuation
The main reason behind the change in prices of products is the fluctuation in their supply which ultimately causes a fluctuation in the demand of those products. For example: when there is shortage of wheat this means that the demand of wheat will be more than its supply and therefore, the price of wheat will increase and people will be willing to pay more, similarly in a case where the supply of wheat will be more than its demand, the price will fall.
Market Dislocation
Another reason for the market dynamics can be the dislocation which can affect the market in the worst possible way. Market dislocation basically makes the market dysfunctional and thus affecting its performance to a great extent. One of the main reasons for market dislocation is the shortage of commodities which results in increased demand which ultimately results in the increased prices of the products.
Satiation
Satiation is another economic phenomenon that can cause market dynamics. In economic terms the word satiation means the more and more of a product a customer consumes the less he/she will be willing to forgo in order to have more of that product.
For example: a person will feel great satisfaction when he eats a mars bar but the second mars bar won’t give as much satisfaction as the first one did and the third one would be even less satisfying than the second one and so on. Therefore, the more the customer consumes chocolate, the less satisfied he becomes with it. This kind of behavior can result in decreased demand which can cause fluctuation in the price of the product.
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