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by bobthepanda
2816 days ago
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If supply were able to keep up with demand, then the tulip price could've stayed the same. Of course, we live in the real world, where you can only ramp up production of good so quickly. But no one said the demand is rational. There are places which manage to build housing without massive price appreciation, like Tokyo. But once the market's too overheated because of supply mismatch you basically can't cool it down only using construction, because construction time takes so long. |
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If the demand isn't rational (for example, actual need for physical shelter), it doesn't require a lack of supply for a market to become overheated.
Markets can be very strongly affected by greed and mass delusion, an actual lack of supply is not required to drive prices up significantly. You could have a fun pedantic argument over that last statement if you don't want to differentiate on the different kinds of demand, but my point is that demand can vary dramatically with little change in underlying fundamentals - human emotion is more than enough.