Supply and demand

[3x-a-d3-u5]

Before studying about the demand and supply curves, I always used to wonder if more farmers made the price go up or down. Or was it more people that eat the wheat that made the price rise or fall. Well After a few years at university and you soon realise that this is the principle of Supply/Demand.

For those who don;t know or didn't have the opportunity to go to tertiary education here's my understanding.

Eskom's power outages early in 2008 caused 'power savers' (UPS's and Generators) to become a necessity to continue business. This would mean that the demand would increase, or more buyers in the market.

Now on the suppliers side, as they sell more they want to make more profit by upping the price. As demand increases, suppliers increase their prices to make more money on the same amount of stock.

Now kids here's a picture


So, the equilibrium between the price suppliers are willing to sell at and the price buyers are willing to buy is the market price. (Qe) This stands to reason, if you can't sell something you drop your price (Current property market situation for example). If you want to buy something, you'll look for the lowest price (obviously if we are ignoring quality). Since the demand has dropped for generators the price you'd pay for a generator today is cheaper than it was 8 - 12 months ago. In fact now would be the best time to buy anything like UPS's or generators, but its human tendency to think "out of sight out of mind", "No power failure, i don't need a UPS...".

To prove my point here is a great offer on a new generator: http://www.powerbackups.co.za/produc...d/79?osCsid=25 Its priced to go at R3999, but 6 months ago they costed well over R6000! (By the way, I used to deal with this company and they have great service, and are running out of stock fast with this genny )

[Dave A]

What will be aggrevating the supply/demand equilibrium is the capital tied up in stock. I'm sure a number of speculators got caught with lots of stock on their hands. They were probably hoping for a load-shedding repeat bonanza this summer during maintenance season, but that hasn't emerged.

So now they know they've got dead stock and 0 growth happening on their capital.

Pretty tempting offer BTW.

[3x-a-d3-u5]

That is true. Maintenance was planned, but with the coal station up and running i think they are managing with the power load. It is a wonder how many websites popped up selling UPS equipment in no-time, and today are no-where to been seen.

Powerbackups as i recall was around long before that and that why I trusted them. The problem with fly by night operators is the guarantee is null-and-void if they go bang.

I wonder if winter will be harsh enough to pull out the heaters this season (Country wide).

[Dave A]

Do those curves have formulas?

BTW - I was just taking a closer look at that generator. I've got one exactly like it, except it's branded as a Firman and the paintwork is bright yellow! It's been a reliable machine so far.

[Martinco]

I saw an ad from Builders W/H over the weekend for the same unit for R 2999.00. ( Rolux)
This certainly proves the point of "Supply and demand"

The question is: How much profit did these guy's make when they sold it for R5999.00 ?

[Dave A]

With dead stock, it pays in the medium term to dump it, even at a small loss, if you've got something else to put the capital into that will produce a return.