Supply and Demand

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Supply and demand is the most important factor in determining prices.

Supply is the amount of goods or services available for sale.

Demand is how badly people want those products or services.

If demand stays constant in both scenarios below then:

The more supply available, the lower prices will be and the less supply available, the higher prices will be.

Between 2014 to 2019 there was a lot of construction for new apartments in New York City (increase in supply) but rent prices kept increasing because there was an increase in demand.

In 2020 there was a lot less construction of apartments in New York City (decrease in supply) and a huge decrease in demand which caused rent prices to drop a lot as the coronavirus pandemic caused many people to leave New York City for the suburbs and rural areas.

So the combination of lots of supply being added to the market between 2014 and 2019 plus the huge drop in demand from renters leaving New York city caused a huge drop in rent prices.

Supply and demand is also the reason for traffic jams with supply being the road available and cars being the demand. 

 

The more cars and the less road (amount of lanes and road design can play a factor here as well), the bigger the traffic jam. 

 

And accidents almost always will decrease the supply of road therefore contributing to more traffic (less supply, same amount of demand).

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