[iterance]

Supply and demand is one driver of economic pricing, but not the only driver. Efficient pricing is a complex topic and not as black-and-white as it seems. As demand falls, the price may be expected to fall, but there is an inelastic limit set by material, labor, transport, and taxation cost. A company may elect to decrease their profit margin per sale to offset increased costs, but there is only so much margin to eat.

In the current circumstances, though, companies do not have a choice to lower prices. The basic cost of taking an item into inventory from these suppliers has risen significantly, in most cases well above 2024 margins.

The net effect is that, despite the market's best effort to correct prices to within an affordable range, costs may rise considerably and availability may still fall regardless. Under severe shock to the system, the usual maxims that account for nominal shifts in day to day trading no longer apply.

[Aurornis]

This is just semantics. If it becomes untenable to supply a good at a given price, the supply for that good decreases.

Then supply and demand reach equilibrium.

Supply and demand doesn’t mean that either or both supply and demand remain constant. Both supply and demand change depending on the price.

[ceejayoz]

> Both supply and demand change depending on the price.

But that's a massive oversimplification. It's like saying programming is "just typing". Technically, sure; accurate, no. There's latency in the real world. Bad actors. Information asymmetries. Regulations. Monopolies. Stuff you can't do without and can't even always decline (ambulance ride for an unconscious person). Fake news about a supply crunch changes demand without changing supply for a while.

[ethbr1]

Most relevant in modern global economies: lack of available alternatives.

One of the primary reasons for combination in low-margin markets is to gain pricing power. And even if there are 2-5 entities in a given market, informal price collusion is far from unheard of.

If OP wants an intro to the determinants of price elasticity, starting here would be a good idea: https://en.m.wikipedia.org/wiki/Price_elasticity_of_demand