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July 22, 2018 

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DISCOUNT: In financial terms, a bond or similar financial asset that sells below its face value. Discounting is done to equalized the interest rate attached to a bond with comparable interest rates in the economy. For example, a $100,000 bond that pays a fixed 10 percent interest on the face value (that is, $10,000 annually) would be discounted to $83,333 if comparable interest rates were above 12 percent. As such, the $10,000 annual interest payment works out to be 12 percent of a $83,333 price.

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BUYERS' MARKET:

A disequilibrium condition in a competitive market that has a surplus or excess supply. Because the quantity supplied is greater than the quantity demanded, buyers have the "upper hand" when negotiating. A market surplus also goes by the more common term of buyers' market. The alternative to a buyers' market is a sellers' market, which has a shortage or excess demand.
A buyers' market exists because the quantity supplied by the sellers exceeds the quantity demanded by the buyers... at a given market price. In this situation, sellers are seeking to sell more of the good than buyers are willing to buy, hence buyers can pick and choose the goods purchased from the sellers. Sellers are lucky to find someone willing and able to purchase their good.

Buyers' Market
A buyers' market is illustrated by the market for 8-track tapes displayed in this exhibit. This graph was generated with data from the 88th Annual Trackmania 8-Track Tape Collectors Convention at the Shady Valley Exposition Center.

At the existing market price of 70 cents, buyers have the "upper hand" in this market due to the excess supply of 8-track tapes. This surplus is indicated as the difference between the quantity supplied and the quantity demanded at the designated market price. In particular, the 70-cent price generates a quantity supplied of 600 tapes and a quantity demanded of 200 tapes. Sellers are willing and able to sell 400 tapes more than buyers are willing and able to buy. This excess supply of 400 tapes is what gives the buyers the upper hand.

Note that a buyers' market does not mean the lack of competition among demanders have given some buyers market control. A buyers' market is a competitive market that simply has a temporary imbalance between the quantity demanded by the buyers and the quantity supplied by the sellers. A change in the market price eliminates the buyers' market, and could possibly even create a sellers' market.

<= BUYERS' INCOME, DEMAND DETERMINANTBUYERS' PREFERENCES, DEMAND DETERMINANT =>


Recommended Citation:

BUYERS' MARKET, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2018. [Accessed: July 22, 2018].


Check Out These Related Terms...

     | sellers' market | excess supply | excess demand | shortage | market disequilibrium | disequilibrium price |


Or For A Little Background...

     | surplus | market | equilibrium | market equilibrium | equilibrium price | equilibrium quantity | competition | market clearing | voluntary exchange |


And For Further Study...

     | market equilibrium, numerical analysis | market equilibrium, graphical analysis | competitive market | self correction, market | competitive market | invisible hand | free enterprise |


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