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In the production process, there can be a case when the demand of the product equals its supply. This market situation is called equilibrium, and it is considered a perfect condition of the intersection of demand and supply curves (What are supply and demand curves? n.d.). Any change in supply or demand may lead to the new equilibrium price, and companies should think over their further actions (Lesson summary: Market equilibrium, disequilibrium, and changes in equilibrium, n.d.). For example, unnecessary reductions in prices can lead to a profit decrease. Therefore, it is more appropriate to wait for the natural changes caused by external factors in the market to avoid a decrease in profit.
At the same time, supply or demand may become dominant. In case of supply overweighs demand, a company may slow down the production process and lower the prices, which leads to an increase in customers’ purchases (Supply and demand shocks, n.d.). In the opposite case, when a company cannot supply as many goods as buyers’ needs, the appropriate strategy is to raise the price to decrease the demand (Reading: What is demand?, n.d.). Meanwhile, a company should find ways to boost its production to be able to provide the market with a sufficient amount of product.
There are certain measures that a company can take to control its production. First of all, it is necessary to make sure that the product will be in demand in the market and that it will be sold. Secondly, a business owner needs to decide how much of the product it is possible to supply to the buyers. As price is one of the decisive factors in the company’s overall success, the business owner needs to determine it wisely to receive as much profit as possible. For example, companies producing high-demand products may raise their price (Dowell, n.d.). Such changes may be abrupt, and they can bring significant profit to the business owner.
In conclusion, it is important to emphasize that reaching equilibrium is a complicated task that requires proper analysis and planning. A company may regulate its demand by raising or decreasing prices, conducting preliminary market analysis, or boosting production. However, taken at the wrong time, such measures may lead to negative changes. Therefore, it is important to think over these measures carefully and the current market situation to avoid a decrease in a company’s production, demand, or profit.
References
- Dowell, D. (n.d.). How supply and demand impacts decisions in business. Chron. Web.
- Lesson summary: Market equilibrium, disequilibrium, and changes in equilibrium. (n.d.). Khan Academy. Web.
- Reading: What is demand? (n.d.). Lumenlearning. Web.
- Supply and demand shocks (n.d.). EconPort. Web.
- What are supply and demand curves? (n.d.).
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