Supply and demand is a fundamental concept in economics, which describes the relationship between the availability of a product or service and its demand, and is a core concept and philosophy in what we do at ShareBuilders.
Supply refers to the amount of a product or service that is available for consumption or purchase at a given time. In general, it is determined by various factors, such as the production capacity of suppliers, the cost of production, and the availability of raw materials. However, in our industry, the supply, or unit capacity of each program, tends to be fixed. Demand, on the other hand, refers to the willingness of consumers to purchase a product or service at a given price.
The relationship between supply and demand is inversely proportional. This means that as the availability of a product or service decreases, demand for it tends to increase, and vice versa. In a market where there is a high demand for a particular product, suppliers tend to increase production to meet the demand, which leads to an increase in the supply, such as when more inventory is opened up in news programming in a year when high political demand is expected.
The law of supply and demand states that the price of a product or service is determined by the level of demand and the availability of supply. When there is high demand for a product or service, and the supply is low, the price tends to rise, and vice versa.
In a market where supply exceeds demand, suppliers tend to lower the price of their products to attract more consumers. On the other hand, in a market where there is a shortage of supply, suppliers tend to raise the price to maximize their profits.
There are several factors that influence supply and demand, which include:
Consumer income: Consumer income plays a significant role in determining the demand for a product or service. When consumers have high disposable income, they tend to purchase more products and services, which leads to an increase in demand.
Competition: The level of competition in a market affects the pricing of products and services. When there is a high level of competition, suppliers tend to lower the prices of their products to attract more consumers.
Technological advancements: Technological advancements can affect the demand for a product or service. When a new technology is introduced, it may render existing products or services obsolete, leading to a decrease in demand.
Government policies: Government policies such as taxation, subsidies, and regulations can affect the supply and demand for products and services. For example, subsidies on production may lead to an increase in supply, while high taxes may lead to a decrease in demand.
The elasticity of supply and demand refers to the responsiveness of the quantity demanded or supplied to changes in price. When a product or service is inelastic, a change in price does not significantly affect the demand or supply. On the other hand, when a product or service is elastic, a change in price leads to a significant change in demand or supply.
For example, basic necessities such as food and water are usually inelastic, as consumers are willing to pay higher prices for them. Luxury products, on the other hand, are usually elastic, as consumers are less willing to pay higher prices for them.
ShareBuilders has used these principles successfully for over 20 years to price your advertising inventory. We sculpt your rates by show, by week based on your market’s unique supply and demand. When a show has open inventory, we lower rates to increase demand. Or, when a show is running hot, we start increasing rates to slow down demand because supply is low. When your team learns to sell station inventory by demand, sellouts improve and so does revenue.