Devalued Market Inventories (DMI)

Devalued Market Inventories (DMI). The concept of Devalued Market Inventories evolved from the analysis done by Enterprise Solved LLC in the United States in 2008 during the economic crisis caused in part by the increase of the supply of homes by home building industry and aggravated by the foreclosure crisis.

DMI resulted from a decrease in demand which led to the decrease of prices, and an increase in quantities. This was an effect of classic demand changing. The market, previous to the demand change, was stimulated by financial products which would support the initial sale of homes but could not be sustained by consumers over the length of the mortgage.

Builders who had constructed homes during the period of increased demand became stuck with an increase of supply with decreased demand. The DMI was exacerbated by foreclosures on recently built and sold homes which re-entered the market and increased supplies even more. This increase in supply caused the equilibrium price to decrease at a more rapid rate than classic scenarios of supply increases. As with classic economics, the equilibrium quantity increased as the quantity demanded increased at the new lower prices. In a supply curve shift, the price and the quantity moved in opposite directions.

ee also

* Aggregate demand
* Aggregate supply
* Artificial demand
* Barriers to entry
* Consumer surplus
* Consumer theory
* Deadweight loss
* Demand Forecasting
* Demand shortfall
* Economic surplus
* Effect of taxes and subsidies on price
* Elasticity
* Externality
* "Foundations of Economic Analysis" by Paul A. Samuelson
* History of economic thought
* "invisible hand"
* Labor shortage
* Microeconomics
* Producer's surplus
* Protectionism
* Profit
* Rationing
* Real prices and ideal prices
* Say's Law
* Supply shock
* "An Inquiry into the Nature and Causes of the Wealth of Nations" by Adam Smith