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Supply and Demand: Explained in English


by mary_rox_sox

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In Neopia, you need a magical little thing called neopoints. We use these neopoints to buy items, and we find the price via shop wizard or trading post. But what makes these prices go up or down?

We call the way prices go up and down the economy, although you might occasionally hear the terms inflation (rise of prices), and deflation(dropping of prices). Neopia’s economy runs on a little thing called supply and demand. This is what makes paintbrushes and such so expensive, not that your fellow Neopians are “greedy little bullies”. TNT only releases a certain amount of an item, but the price is determined by us. Let’s take an Island Paint Brush for our purposes. The only way to get one of these is through random events, or, if you’re lucky, freebies. So, there aren’t that many. Let’s just use the fictional number of “100”.

Now, all those Island pets are quite pretty. So you want one. So does your best friend. And your guild. And a large part of Neopia you don’t know, plus a bunch of newbies.

So who gets them? The lucky 100 Neopians. Now let’s say 50% of those Neopians decide to paint their pets with one. Now you only have 50 paintbrushes left.

You know I’m too cute to resist.

So, who gets the pretty paint brush? That’s up to the lucky Neopians to decide. We’ll call them the sellers. We’ll call you and, say, 1000 other Neopians, the buyers. So seller #1 is a newbie and foolishly puts it up in his shop for a mere 99,999 NP. A wiz sniper quickly gets it and decides to put it up in his trades, along with 90% of the other sellers. The other 5 decide to put it up in auctions, but the price quickly gets up to the same exact price as the trades.

So, what would that price be? Suzy Q. has 2 million neopoints and is willing to spend it all on the pretty paint brush for her Ixi. Bob, on the other hand, has 100K (100,000) neopoints and is willing to spend 90K of it on the paintbrush. They both neomail seller #1. Guess what offer seller #1 takes? 2,000,000 NP or 90,000 NP? Which seems logical? The 2 million neopoints, of course!

So do you get how supply and demand incorporates in rising prices? It’s a simple equation:

Few items + Lots of want = high price

Or

Fewer sellers + Lots of buyers = many very, very disappointed Neopians.

But what about prices going down? What makes your wooden blocking shield only a couple neopoints? This is also because of supply and demand. It’s not because the buyers are “greedy little meanies” that won’t buy from your shop to help you save up for your much needed medicine for your neopet (which, by the way, you don’t need since you can just stop by the Healing Springs ;)). In fact, as harsh as this sounds, most of Neopia doesn’t care about your problems. If fact, you should probably just take those type of things up with your neofriends to avoid being called a “n00b”, or Not Operating On Brains.

Let’s say you just joined Neopets, and you got yourself a wooden blocking shield. So did your best friend. And their best friend. And every person who ever joined Neopets. Let’s say that’s 100,000 shields. So, Lucy B. puts hers in her shop for 500 NP, and BillyBobJoe puts his in his shop for 1 NP. Alex W. wants a cheap shield for her battle with her best friend, and she’s currently the only person looking to buy one. Is she going to buy from Lucy B. or BillyBobJoe? BillyBobJoe, of course!

No one wants to buy me? I’m hurt. :(

So, do you get how supply and demand incorporates in falling prices? Here’s the equation:

Lots of items + Low want = low price

And

Lost of sellers + Few buyers = all sellers competing for buyers, and therefore prices lower greatly.

But some items change throughout the year. Why is this? It’s still because of supply and demand, but it’s also a bit different. Let’s take my friend, Christmas Paint Brush. Christmas is coming up, and everyone’s into the seasonal cheer. Naturally, they want their pets to be in it, too. So, what do they do? The most festive thing would be to buy a spiffy Christmas paintbrush!

But the only way to get a Christmas paintbrush is random events and freebies, unless if you were around in the early, early years of Neopets, which you then got one from the Advent Calendar. But most of those have been sold.

Yay! People love me!

Let’s say there is a total of 200 Christmas paintbrushes in Neopia on December 22. 1000 Neopians want to get into the holiday spirit. Holly C. bids 100K, Nick C. bids 200K, and Randolph R. bids 200K + a codestone. Whose offer is the seller going to accept? Randolph’s, naturally.

Now, it’s January 1st. Christmas is over, and therefore painting your pet Christmas now wouldn’t be nearly as cool. Now, Holly C. is the only person who bids on Justin T.’s trade, with 100K, so she’s accepted. The demand went down immensely in just nine days, and therefore, so did the price.

With seasonal items, the equation is a bit different. It looks more like this:

Time of year + Rarity + Number of buyers + Number of sellers = Price

That means some seasonal items, such as Abigail’s prizes from the Daily Dare, take a long time to go up in price because many people have it. But AAA’s prize might be a bit different, like the Christmas paint brush.

Now you’re officially educated on Supply and Demand’s role in Neopia’s economy! Do great things with your new knowledge! If you have any questions, comments, or concerns regarding this subject, please let me know. If you also have any questions, comments, concerns, or constructive criticism on my writing, those are more than welcome as well. :)

 
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