Supply-determined

The adjective 'supply-determined' describes a market or economic situation where the availability of goods or services, rather than consumer demand, is the primary factor governing the price, availability, and overall quantity of those items. It signifies a scenario where production limitations, resource constraints, or logistical challenges exert significant influence, even dictating consumer access and sometimes overriding typical market dynamics driven by demand. This can occur in industries with high barriers to entry, limited raw materials, or situations like natural disasters impacting production capacity. The term underscores that supply constraints are the dominant economic drivers. Consequently, prices are likely to be high, and customer choices are constrained to the available selection.

Supply-determined meaning with examples

• During the semiconductor shortage, the electronics market became supply-determined. Despite strong consumer demand for smartphones and computers, the limited chip production drove up prices and availability issues, creating frustrated consumers. Retailers struggled to keep shelves stocked due to the manufacturing constraints.
• The limited supply of a rare earth mineral crucial for electric vehicle batteries creates a supply-determined market. Automakers must compete fiercely for access to this resource, impacting production targets, raising the cost of EVs, and potentially restricting consumer choices to specific models that require less of the mineral.
• Following a hurricane, the gasoline market in the affected region often becomes supply-determined. Damage to refineries and pipelines restricts the supply of fuel, leading to price surges, long lines at gas stations, and rationing. The pre-disaster demand is eclipsed by the immediate supply constraints.
• In the market for specialized medical equipment, the manufacturing lead times and the specialized skill required to produce the device leads to a supply-determined dynamic. Demand might be high, but delivery can be six months. Only a very small number of customers have access to them initially.