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If you have been queuing at the petrol station to get bargain-priced fuel, or indeed to buy any fuel, you will have seen prices increasing dramatically, daily! Welcome to supply and demand economics in play.  

Or if you have joined the crowds at a for-sale, home open or a property to lease, and left like many without the keys to the front door, you are experiencing the ‘supply and demand’ economic principle. In fact, it is often referred to as the Law of Supply and Demand and is a fundamental concept in Economics. 

In simple terms, supply is how much of a product is available in the market, while demand is how much of it people want; together, these form the basic economic theory of supply and demand.

The next part of the equation is the relationship between the two. The amount of a product, commodity or service available and the ‘want’ of buyers to purchase it are the factors determining price. 

It's how buyers and sellers interact to determine the price and supply of a resource. When demand outstrips supply, prices will increase.  In a free capitalist, competitive market -it‘s economics in play. The price of an entry-level property in Perth now costs twice as much as it did five years ago! 

Did you experience these examples? I did! The price of chocolates rose dramatically in 2025, as cocoa production dropped globally due to severe storms. And here we are, April 2026, Easter eggs exemplify the ongoing impact. A leading chocolate maker spokesperson advises, ‘we are navigating higher cocoa and input costs globally’. COVID disrupted and strained global supply chains, transportation and productivity, and subsequently shifted demand patterns. Supply was constrained, and demand spiked. 

The same thing occurs with other commodity essentials - toilet paper is a popular item, leaving the shelves like hot cakes!    

How it works. Cause and effect! It’s a balancing act!

Shortages: When demand exceeds supply, prices usually rise. Perth is experiencing a chronic rental shortage with vacancy rates near historic lows (around 0.6%–0.7%) and massive competition for properties, often seeing over 100 people lining up for a single viewing. The market has seen a 18% surge in median rents over the past year, driving intense competition among prospective tenants.

Surpluses: if supply exceeds demand, prices tend to fall. For example, in 2025, a global oversupply of red wine was forecast to continue to affect prices and the viability of growing red wine grapes until supply and demand are better balanced. 

Shifts: Changes in market conditions, such as consumer preferences, production costs, Government policies, or income, are factors resulting in new prices and quantities. An example is the market glut in red wine that occurred in 2023/24, largely driven by a drop in the export market. Loss of the Chinese market due to tariffs imposed in 2020, along with high production levels, were contributing factors.  

Economic equilibrium is achieved when the quantity demanded equals the quantity supplied.  

If you want to learn more, read-up on Supply Curve basics! 

We are all caught up in this cycle. What to do? 

Are you a small Business operator looking to manage market imbalance? 

It starts by understanding this concept to better comprehend market dynamics, pricing mechanisms, production decisions, and availability of goods, along with overall economic conditions. 

• Supply chains - ideally, diversify suppliers to help mitigate problems. Relying on a single supplier is risky. Build and maintain a database to help avoid potential problems. Remember the old saying, ‘don't have all your eggs in one basket’. 

• Sources – If applicable, source local or regional bases that can offer better control, faster turnaround times and lower delivery costs. For example, the Independent grocery chain advises they source from local farms and producers, to help keep down costs and support WA industry. Explore your own ‘backyard’, seek and find if there are untapped opportunities. 

• Working Relationships – develop strong relationships with key suppliers as they are more likely to support and prioritise your Business during shortages. A win/win. 

• Stock - If practicable, be open to sourcing different or similar products. There may be alternatives that can fill the gap, and who knows, they may become regular items. Be creative and open-minded in your thinking. 

• Production – ensure production operations are working effectively and to full capacity. Harness Technology to help deliver the most efficient outcomes. Inventory management software and SCM management tools are examples. 

• Purchase limits – if needed, implement buying limits during high demand and low supply. This can ensure more customers have access to products. 

• Proactively manage Customer expectations. Communicate openly and honestly with your customers. In doing so, they are more likely to understand and accept the issues, and you will gain respect and loyalty. Value this relationship. 

• Adjust Pricing – as supply and demand forces come into play, make sure your pricing is reflected accordingly. For example, with rising fuel costs, your suppliers may increase their charges. This isn’t about price hiking, it's about staying financially sound. 

• Monitor Cashflow - monitoring your cashflow and adopting sound strategies are crucial at any time, and critical during these uncertain times. It is the lifeline of your Business. Need advice?  Contact Blackbuurn Accounting, we offer an individualised service that helps you keep on top of your cashflow, assist in strategic planning, tax minimization and cashflow management. 

There you have it! Supply and Demand economics in action! 

Watch this space for more on this topic! The drivers, policy and practice! It’s this perfect storm of variables and events shaping our lives and livelihoods as I write!