Friday, October 5, 2012

When Supply is Greater Than Demand

The New York Times has a great article on the solar panel industry, and the impact on that industry when supply is greater than demand.  As predicted by the supply and demand model, prices move toward equilibrium where the amount supplied is equal to the amount demanded.  When that does not occur (as in the solar panel industry today), and the amount supplied is greater than the amount demanded, then the supply and demand model predicts that prices will decline to get back to equilibrium; and that is exactly what is going on now.

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