Many folks don’t really give too much thought to a marketplace other than where we go to purchase something we want or to sell something. But in reality, markets are very important to our lives. Whether going grocery shopping, filling up the car with gas or buying stocks, marketplaces are important in many everyday events in most Americans’ lives.
But what actually controls the price you pay in any market? What will someone receive if they sell something? Can a person even buy or sell something whenever they want?
It really all boils down to the concept of supply and demand. These concepts are often illustrated by the terms “A Buyer’s Market” and “A Seller’s Market” Let’s take a look at these terms:
A Buyer’s Market
A Buyers’ Market refers to the situation when the item or service is plentiful or in high supply. Because there is so much of it available, there is competition among the sellers to lower their prices even lower than their competitors, thus making in less costly for a buyer to obtain it. Simply put, a Buyer’s Market results in lower prices for the buyer
A Seller’s Market
In contrast, a Seller’s Market is a situation when a particular good or service itself is in high demand, but its supply is low or curtailed for some reason. Buyers typically have to pay higher prices than they would like for the good or service that they would like or have been able to in the past. Sellers are in control and can often make great profits if for some reason they have an ample supply of the good or service wanted.
Example of Buyers vs. Seller’s Markets
Real Estate often provides us with examples of both Buyer’s and Seller’s Markets.
Some market watchers believe that 2018 will be a Seller’s Market for homes because of the scarcity of homes in the real estate market. This may enable sellers to keep prices high and make a high-dollar pitch to first-time millennial buyers ready take the homeownership plunge.
Stocks, gasoline, gold, food, and cars are other examples of goods that periodically enter into Buyer’s or Seller’s Markets, again ultimately based on supply and demand. It makes sense to stay tuned into these ebb-and-flow trends. It can save you or make you money if you pay attention.