Final answer:
The question discusses the difficulty in balancing supply and demand in a way that maintains appropriate inventory levels without driving costs unreasonably high. The basic principles of supply and demand dictate that extreme prices can distort usual patterns of demand, but there are natural limits. It is impossible to balance capacity and demand perfectly without facing potential inventory surpluses, which can be unsustainable in a market system.
Step-by-step explanation:
The phenomenon you're referring to involves the complex dynamics of supply and demand in relation to pricing and inventory management. Generally, in the basic model of demand and supply, higher prices lead to a lower quantity demanded and lower prices lead to a higher quantity demanded. However, this relationship has natural limits. If the price is too high, demand will decrease, and conversely, if the price is too low, the perception of value may increase demand until the price or quality adjusts. Importantly, when balancing capacity to demand perfectly, one might face the issue of inventory accumulation, suggesting that matching production perfectly with demand can lead to surpluses that increase inventory costs. This can prove to be unsustainable, especially if exponential growth is expected within a market.
In reality, numerous factors can impact this dynamic, making perfect balance challenging. For instance, consumer preferences, market competition, and information dissemination can lead to adjustments in prices and perceived value over time. A scenario where the prices of goods, including vital resources, become arbitrarily low disregards the economic principles of supply and demand because limited resources are unlikely to ever be free or nearly free in a functioning market system.