Market dynamics are pricing signals that are created as a result of changing supply and demand levels in a given market. Market dynamics describes the dynamic, or changing, price signals that result from the continual changes in both supply and demand of any particular product or group of products. Market dynamics is a fundamental concept in supply, demand and pricing economic
models.
Any change in either the supply or demand for a specific product or group of products forces a corresponding change in the other, and these variances cause pricing signals. In a free or open market in which no entity has the ability to influence or set prices, the price of a good is determined by the market, which consists of the buyers and sellers, collectively. A single entity or group, therefore, is unable to have a significant effect on market dynamics.
Market dynamics determines:
• When price increases, how consumer react
• Supplier‘s reaction to the change in demand
• Changes in one supply-demand relationship affects the other product and consumer groups
