Buyers Market One

Buyers Market One

Buyers' Market, one in which producers are willing to produce, or sellers willing to market, larger amounts than buyers are currently willing to pay for at existing prices. Stocks pile up, prices are forced down, suppliers cut or stop production and buyers gain from the lower prices (unless their wealth or incomes are reduced by the state of such markets).

In manufacturing firms will minimize their losses by continuing to produce until specialized plant wears out so long as prices at least cover out-of-pocket (marginal) expenses and make some contribution towards overheads. In agriculture self-employed farmers may even increase production when falling prices reduce their incomes because they cannot easily or do not wish to change their employment.

Buyers' markets are characteristic of slumps. They also occur in individual goods at times of full employment because of the slow adjustment of capacity to shifts in demand, over-estimation of demand, installation of excess capacity by firms in ignorance of one another's plans or in full knowledge but with the intention of eliminating rivals, and the unpredictability of harvests.

Buyers' markets may last for only a few hours (as when a bumper catch of fish is landed) or for a decade or more (as when there are large stocks of durable goods such as houses). When a buyers' mark is caused by excess capacity its duration depends upon the specificity, durability and age of the plant. As plant is often specialized and its life usually exceeds the time it takes to build, buyers' markets with overcapacity generally last longer than the corresponding sellers' markets with under-capacity. For example, the buyers' market in cotton goods persisted throughout the inter-war years as Lancashire mills went slowly out of production; but the sellers' market which followed the disruption of production in Europe and the Far East in the Second World War lasted for only some six years.

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