A supply economy is when one party expresses an interest in buying or selling an asset from another party. The offering price is often the highest the buyer will pay to buy an asset, and the lowest the seller will accept.
There are many different types of bidding economy, each of which has a different combination of characteristics ranging from pricing requirements, rules and regulations, asset type, and buyer and seller motives.
For example, when buying a home, potential buyers will make an offer to the seller, often listing the highest price he or she is willing to pay. However, if another potential buyer enters the scene and a bidding war starts, each buyer will continue to bid until their maximum price level is reached.
Companies can offer a variety of things to the investment community. For example, when a company has a stock or debt offering, it will offer stocks or bonds to investors. Also, the company can offer rights to its shareholders, allowing them to buy more shares.
A buyer's market is a situation where supply exceeds demand, giving buyers an advantage over sellers in price negotiations. The term “buyer's market” is commonly used to describe real estate markets, but it applies to any type of market where there is more product available than there are people who want to buy it. The opposite of a buyer's market is a seller's market, a situation in which demand exceeds supply and owners have an advantage over buyers in price negotiations.
The concept of buyer and seller markets comes from the law of supply and demand. This law states that an increase in supply amid constant demand puts downward pressure on prices, while an increase in demand in the midst of constant supply exerts upward pressure on prices. If supply and demand rise or fall in tandem, prices are generally much less affected.
A market oscillates from the market of a buyer to the seller, or vice versa, when the level of supply or demand moves without a concomitant change in the other, or when the two move in opposite directions.
