high volumes, high cost of production, low prices


	-> suppliers leave the industry

	-> capacity taken offline

	-> volumes of supply fall

	-> prices rise




low volumes, high prices


	-> suppliers enter the industry

	-> volumes of supply increase

	-> prices fall



net effect

	volumes produced adjust themselves so that prices and volumes reflect the underlying

	need/interest in each type of product


	e.g 

		1. wheat produced = 100,000 tonnes per year (example, check acutal figure)


		2. spark plugs for type 12.1B engine from 1927, 5 produced per year





