World of warcraft’s economy is driven primarily by supply and demand. All the items you can buy or sell are useful to people in some fashion. This is different to real life securities like stocks which are not intrinsically useful outside of their ability to generate profits. There are very few players who buy or sell items because they expect a large price change.
Supply and demand changes will change the prices of goods
Whenever the supply or demand for an item changes the price will change drastically. Changes to supply or demand are usually caused by some change in the game. Major patches always lead to changes. Typical changes that affect supply or demand include, changes to drop rates, new recipes, new end-game content, new quests and new classes.
Figuring out if supply or demand will change
What we care about is of course figuring out if supply or demand will change, and specifically in which direction. This can be tough, especially since you may not even have a good grasp of what “Supply” or “demand” even is. Luckily we can at least simplify it down to some very easy to understand questions, even if answering them may not be straightforward.
The supply of an item can be viewed several different ways. The number of items currently on the AH, the number of item posted on the AH for a week or the number of the item being generated on your realm for the week. Blizzard will typically only change the speed at which an item is generated. This can be done through drop rates, higher node density or the introduction of flying. This leads to a change in the number of item X that you can generate per hour. This will naturally increase or decrease the items available on the AH after a little while.
To figure out if the supply for an item will change just think ahead: “Will it take more or less work to get this item after the patch?” Yes means supply goes down and prices typically go up, no means supply goes up and prices typically go down. There are usually other factors at work though, so just the rate will never be enough analysis.
Demand changes are much, much harder to nail down than supply changes. Supply changes can be calculated directly for raw materials as you can just compare the per hour rate before and after a patch. Demand changes are caused by changes in player behaviour as they value different items. Factors that will have large impacts here include new recipes, new classes / races, new raids, new dungeons and changes to recipes.
The question you want to answer is of course “Will players need/want more of this item than before?”. It’s obvious that this question includes a fair bit of speculation. My view is that players will always be willing to pay to improve their character by either getting stronger or looking cooler. They will typically pay more to get strong than look cool.
Go forth and speculate
Now go think through some changes. Patch 8.2 just happened so take a look at some items on the undermine journal to see how their supply and price changed and try to answer my questions above for them. This will get you some practice thinking about this part of the game. It is conceptually quite simple, but putting it into practice ahead of time can be REALLY hard as there are typically a very large number of unknown changes in any patch. So keep that in mind, hindsight is 20/20.
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One thought on “Goblin Mindset: Understanding changes to supply and demand”
I rejoined in July last year. I’d been making steady income from medium leather. No idea what it was bought for but was regularly selling it for 10g to 13g each. To the point I was also buying light leather if it was cheap enough in bulk to profit from converting it to medium. In the last 2 months I’ve been lumbered with 2000 medium leather in my inventory that just don’t seem to be selling. People have been desperate and flooding the AH with medium leather at 40% the normal price. Bloody annoying 🙂