There is a supply and a demand for most goods. The result is a market clearing equilibrium price. Companies many times (especially around Christmas) supply a certain amount of the "hot/must have" product to the market. Invariably there is more demand than supply.
A good example of this will be the new iPad 3 or Halo Reach video game (wait until Christmas and see).
Why would companies limit the number of units produced? Does this invariably lead to "black markets"? How do black markets affect the supply and demand?
What determinants of supply or demand ( book calls these "shifters") might cause a change in the supply and demand curves? Explain.© BrainMass Inc. brainmass.com December 15, 2020, 8:58 pm ad1c9bdddf
Limiting the number of units produced by any company stabilizes the price of the product. The company that will not limit its production will find out later that the price of the product will be affected through the operation of supply and demand. The more quantity of products you produce the more it depresses the price. Overproduction leads to surpluses. Surpluses lead to decline in selling price. This may seem favorable to the consumers but in the long run it is the entire economy that suffers. What is worst is that when ...
The solution discusses the supply and Demand analysis.