Price discovery mechanisms under supply-side and demand-side constraints

Finding a fair and accurate price for a product is the invisible goal of different market forces competing in the same marketplace. If the market is allowed to operate on its own without much interference from the government, then the price discovery mechanism can be influenced or biased under either demand-side economics or supply-side economics. For demand-side economics, the operating principle of the market as influenced by government regulations is to allow demand for the product to form naturally, and with this demand, there is induced supply to meet this demand albeit with some time lag for production capacity to ramp up. Under this scenario, the price of the product is likely to be upward biased or more expensive as supply is slow to meet demand. On the other hand, if the market operates under supply-side economics, such as the government provides financial incentives to produce more computer chips, then the supply is usually larger than demand. In addition, demand can be met easier and quicker, but the product price is downward biased or cheaper as supply is larger than demand. Hence, depending on whether the product market is operating under demand-side economics or supply-side economics, the prices are either upward or downward biased, and remains a less efficient economic outcome. To allow a more efficient price discovery process, barriers to supply such as import limits should not be excessive, and media hype for a product should be ameliorated to help reduce demand pressure.