New Venture Marketing

The interaction of supply, demand and prices. Here is a simple example: imagine that two producers of fizzy drinks are in competition. One produces orangeade, the other lemonade. If tastes swing away from orangeade to lemonade, demand falls for the former and rises for the latter. In response to falling demand, the orangeade producer lowers prices; while in response to rising demand, the lemonade producer raises them. The consumers react to the higher prices by buying less lemonade, and to the lower prices by buying more orangeade, so that demand for the two returns to the original level.