task0778
Diamond Member
Supply is based on projected demand at a certain price point;
So - Demand is driven by supply, not the other way around.
That's a contradiction.
The incentive to supply anything at any price point is based on the belief that demand will exist. Period, full stop.
As several people here have pointed out, suppliers don't know what the demand will be so they operate on the assumption, the belief that there will be a demand for whatever it is they are creating.
Now If it were me, I would research my product, I would ask questions. I might even make a few of the things that I want to produce is very small batches (suppliers call these prototypes) so they can test what it is people like and don't like.
Of course, that still does not guarantee success because there are often factors that suppliers fail to consider. But the fact remains that the only reason to ever, ever make anything with the intention of creating profit is that you believe that there will be a demand for it. It is that demand that drives suppliers to create goods and services.
Without the capacity to consume, no amount of supply would change that fact, but without supply, people can still have the desire to demand.
To the contrary there's no contradiction at all. You are ignoring the price, which depends on the cost of supply. The world knows that demand depends on the price of the product or service, end of story. You yourself said as much in an earlier post, you decide whether or not to buy something depending on the price. No producer in his/her right mind is going to start making a product without having a good idea up front what the demand will be AT A CERTAIN PRICE POINT, which in turn depends on the cost of supply. A lot of research goes into trying to figure out what the costs for everything are going to be so you can then determine what your costs of production and distribution are going to be. THEN you can try as best you can to determine what the demand will be AT THAT PRICE. Doesn't matter how much demand there is if you can't sell the product at a price that people will pay AND you make a reasonable profit. Nor can you estimate what the demand will be if you have no idea what the price will be that you can sell the goods or services at.
This ain't rocket science, if demand is estimated to be sky high for a product or service at $20 but you can't produce it for less the $25, guess what? You're going to go make something else. Maybe you'll try to cut costs down below $20 by automation, moving ops offshore or to a non-union state, or maybe a smart federal gov't cuts your taxes and the costs of compliance with regulations down to where with some other factors you can get your costs down below $20, now you'e got a viable proposition if you think it'll stay viable for the near future, say out 5 years. For sure demand has to be there, but it's gotta be there at or below the price you can produce your product at. And again, that is why demand does not drive supply.