Tuesday, December 6, 2016
Supply and Demand for the Holidays
Say there's a hot new toy on the market and demand for it is very high. As the holidays get closer, the consumer will be more willing to purchase these items at a higher cost. Assuming supply will go down due to the high demand, the supply curve will shift to the left. This is will drive the equilibrium price up and the quantity supplied will be driven down.
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Demand would not itself lead to a shift in supply. However, if there is market power, and the holiday season makes demand *less elastic*, then an individual firm making a particular (differentiated) toy will have increased price-making power. This might lead it to reduce its quantity supplied.
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