Your team is debating the roadmap. Engineers quote high effort for a new feature the sales team swears will unlock a whole new market segment. Marketing wants a lower price point to drive volume. You're caught in the middle, trying to balance scarcity and desire.
This isn't just a planning meeting; it's a live-action supply and demand problem.
The supply and demand curve graph is more than a dusty chart from an economics textbook. It is a map of the invisible forces that determine your product's success. It visualizes the fundamental tension between what you can build (supply) and what your users truly want (demand).
Understanding this graph is like having a compass in the wilderness of product strategy. It helps you see the market clearly.
From Theory to Product Reality
Last month I watched a product manager struggle to justify a major platform refactor. It was high-cost, with no immediate customer-facing benefit. The conversation was going nowhere.
Then she reframed it: "Our current tech debt is a supply constraint. It’s making every future feature more expensive to build." Suddenly, the team got it. The investment wasn't about code; it was about shifting their ability to supply future value more efficiently.
The basic gist is this: every decision you make, from pricing tiers to feature releases, is an attempt to find that sweet spot where what you offer meets what people will pay for. This article will introduce this concept not as theory, but as a practical lens for making smarter product decisions.
This lens is fundamental. It reveals that product management isn't just a series of tasks but the active management of a micro-economy, as detailed by Alfred Marshall in his seminal 1890 work, Principles of Economics.
Of course, it’s not just about 19th-century economics. Modern factors play a huge role. For instance, understanding your product's Share of Voice in marketing can significantly influence its market presence and, consequently, its demand curve. Strong visibility can make users more willing to "buy" your product at any given price.
Your job is to read these forces. By visualizing them, you move from reactive decision-making to proactive market shaping. The supply and demand curve gives you a framework and a language to articulate the tradeoffs between engineering capacity and market desire.
It helps you navigate the complex dialogues that define product leadership. The goal is to make these invisible forces visible.
Decoding The Lines Where Scarcity Meets Desire
Think of your product’s market not as a spreadsheet, but as a concert venue. On one side, you have the stage, the lights, and a fixed number of seats. That’s your capacity, your team’s ability to build and support the product. This is your supply.
On the other side are the fans. Some are die-hards, willing to pay anything for a front-row seat. Others are casual listeners who might show up if the price is right. That’s the collective desire for what you’ve made. This is your demand.
The supply and demand curve graph simply puts these two forces on paper, showing how they dance together to define your product's place in the world.
This is what I mean.
Every product lives at this intersection. It’s a balancing act between what’s possible to create and what the market truly values.
The Demand Curve: A Popularity Contest
The demand curve is the voice of your user. It almost always slopes downward. Why? Simple: as the “price” of using your product goes down, more people are willing to “buy” it.
But “price” isn’t just money. It’s also time, complexity, or cognitive load. A confusing UI has a high price, and fewer people will bother to pay it.
This is the entire logic behind a freemium model. By setting the entry price to zero, you dramatically lower the barrier to entry, moving way down the demand curve to attract a massive audience. You’re opening the back lawn of the concert for free, hoping some will eventually pay to upgrade to a better seat. To map this out, you need to conduct thorough primary customer research to understand what truly motivates users at each price point.
The Supply Curve: The Reality of Production
The supply curve is the voice of your engineering and operations teams. It usually slopes upward. As the price people are willing to pay goes up, your company is more motivated to supply more of the product.
Think about it: higher revenue justifies hiring more developers, buying better infrastructure, or pouring resources into a new feature.
I recently watched a team debate adding a complex AI feature. The "price" users would pay was a higher subscription tier. That potential revenue was the justification for the "cost" of hiring two specialized machine learning engineers. It was a classic upward move along the supply curve. If you want to offer more seats at your concert, you have to invest in building a bigger stadium.
The supply and demand curve graph isn't just an economic model; it's a visual story of the conversation between your users and your business. The demand curve asks, "What is this worth to you?" The supply curve answers, "Here’s what it costs us to provide."
As a product leader, your job is to listen to both sides of this conversation. You have to interpret the desires of the many while respecting the real-world constraints of production. This graph is your translator.
The Equilibrium Point: Your Product's Center of Gravity
The magic happens right where the two curves cross. This intersection is the equilibrium point, and it’s the market’s natural resting state. It's that perfect spot where the number of users who want your product lines up exactly with the quantity you can provide at a certain price.
Think of it as your product's center of gravity.
Finding this point is the quiet obsession of any product manager. Nail it, and your business model just hums along. You’re not leaving money on the table by underpricing, nor are you overbuilding for a market that isn’t there. Get it wrong, and you’ll feel the friction.
The Consequences of Imbalance
Here’s what I mean. If you price your SaaS product too high, you create a surplus. Suddenly, you have excess server capacity, support agents with too little to do, and advanced features collecting digital dust. The value might be there, but the cost creates a barrier most of your target users won't cross.
Price it too low, and you get a shortage. Your servers get overwhelmed, customer support tickets pile up, and your roadmap gets choked with requests you can’t build fast enough. You've definitely captured demand, but you don't have the supply to serve it profitably or well.
A friend at a Series B company recently told me their biggest mistake was misjudging equilibrium. They launched with a low introductory price to grab market share, but their user base exploded by 300% in two months. This created a massive feature shortage. The backlash from the necessary, and painful, price hike that followed was a hard lesson in finding balance from the start.
Finding Equilibrium in the Real World
Market equilibrium isn't just a theory; it dictates the price of everything from a barrel of oil to your morning coffee. The upward-sloping supply curve meets the downward-sloping demand curve at this crucial point, a concept Alfred Marshall popularized. This intersection drives global commodity prices, a dynamic you can explore in the IMF's analysis on supply and demand.
For us product managers, this isn't about global commodities. It's about user value.
Think of it like a constant negotiation. Each feature release is a new offer. Each pricing change is a new ask. The market responds, and you adjust, always seeking that point where value provided and value perceived are in sync.
You can spot this dynamic even when money isn't the primary factor. Comparing the user experience of two competing products reveals a search for equilibrium around user effort. A product with a smoother, faster setup flow has a lower "effort price," which can attract more users even if its monetary price is the same or higher.
Take a look at this detailed competitive analysis comparing the setup flows for Cal.com and Calendly. It shows how reducing the friction, the "price" of onboarding, can be a strategic move to capture more demand. One product's efficiency becomes the other's market pressure.
The grounded takeaway here is to see your product not as a static object, but as one side of a dynamic equation. Your goal isn't to set a price and forget it. It's to constantly read the signals of surplus and shortage. Is a feature going unused? That’s a surplus. Is your support team drowning in requests for something you don’t offer? That’s a shortage. Each signal is a clue guiding you back toward your product’s center of gravity.
Understanding When The Market Moves
Equilibrium isn’t a destination. It’s a temporary state, a fleeting moment of balance before the market inevitably shifts again. So, what’s the point of finding it, then? The real power of the supply and demand graph isn't just finding that center of gravity, it's understanding what makes it move.
A market is not a snapshot; it is a film.
These movements aren't random, they're driven by curve shifts. This is when the entire supply or demand curve slides left or right. A shift is fundamentally different from a price change, which just causes a move along the existing curve. A shift means that at every single price point, the underlying desire or capacity to produce has changed.
What Shifts The Demand Curve
A demand curve shift signals a change in collective desire. Did a major tech influencer just praise your product? Your demand curve will likely shift right, as more people now want your product at any price. Did a competitor just launch a compelling alternative? Your curve might slide left.
The main drivers of demand shifts are:
User Income: As your target customers' budgets grow, they may be willing to buy more of your product, shifting demand to the right.
User Preferences: A cultural change or new trend can dramatically alter tastes. The global move to remote work, for example, permanently shifted the demand curve for tools like Zoom and Slack far to the right.
Price of Related Goods: If a complementary product (like a popular integration) becomes cheaper, demand for your product might rise. But if a substitute product lowers its price, your demand is likely to fall.
For product leaders, anticipating these moves is everything. Learning how to analyze market trends is a powerful asset for getting ahead of these changes, not just reacting to them. This is where real strategy is born.
What Shifts The Supply Curve
A supply curve shift reflects a change in your team's ability to produce and deliver. It’s a shift in your operational reality. Did your team just adopt an AI-powered tool that cuts coding time? Your supply curve shifts right, meaning you can now deliver more value at the same cost.
The most common causes include:
Technological Advances: New tools, better automation, or more efficient processes all reduce the cost of production.
Input Costs: If your cloud hosting fees or even developer salaries go up, your supply curve can shift left, making it more expensive to deliver the same product.
Regulations: New data privacy or accessibility rules can add development overhead, shifting the supply curve left.
I recently saw a product manager justify a major investment in their design system. She didn't talk about clean code. She said, "Inconsistent components are an input cost. They're shifting our supply curve left with every single sprint." That reframing instantly clarified the business value for everyone.
You can find more insights on using AI to predict these kinds of market needs in our guide on AI tools for product demand forecasting and predictive analytics.
A market shift is like a change in the weather. You can't stop the rain, but you can see the clouds gathering and decide to bring an umbrella. Anticipating curve shifts is the product leader's umbrella.
These shifts have very real consequences. For a macro example, look at the recent volatility in global commodity markets.
The big-picture takeaway, the zoom-out moment, is to train yourself to see these shifts coming. Don't just track your own metrics. Watch your competitors, read industry news, and understand the macroeconomic trends that affect your users. By thinking in systems, you can move from simply managing a product to truly navigating the market.
Shifting Your Product's Supply Curve With Smarter Design
While you can't always control the shifting sands of user desire, you have immense influence over your own supply curve. Every bit of efficiency you build into your product development process shifts that curve to the right. This means you can deliver more value at every conceivable 'price' point, whether that price is paid in dollars, time, or user effort.
A supply curve shift isn't about making developers work harder. It's about making their work smarter.
This is where modern processes and tools change the game. They act as technological advancements that lower your cost of production. This isn't just theory; it's about reducing the real 'cost' of shipping high-quality UX.
The Hidden Costs in Your Design Process
Imagine your design system tokens as raw materials. When those tokens are inconsistent, misaligned, or poorly documented, your "input costs" skyrocket. Engineers waste hours trying to translate ambiguous designs, which leads to delays and rework. This friction acts just like an increase in material prices, shifting your supply curve to the left and resulting in slower, more expensive feature releases.
These small drifts in your design system are the digital equivalent of a supply chain disruption. And these shifts can reshape markets. Post-lockdown supply shocks, like semiconductor shortages, shifted curves left and caused average car prices to spike by over 40%, a phenomenon well-documented by the Bureau of Labor Statistics. In product terms, a messy design system can easily inflate handoff delays by 50%.
In short, sloppy design hygiene isn't just a nuisance. It's a negative supply shock that your users will eventually feel.
Shifting the Curve Right with Automation
Conversely, every efficiency you introduce is a technological advancement that shifts your supply curve to the right. So how do you proactively do this?
Last quarter, a PM at a fintech company shipped a file upload feature. Engineering estimated 2 weeks. It took 6. Why? The PM specified one screen. Engineering discovered 11 additional states during development. By mapping out every state of a complex flow before writing code, like for a Shopify checkout setup, you can prevent these surprises.
This proactive discovery accomplishes a few things:
Reduces Unplanned Work: By mapping all edge cases upfront, you kill the "what should happen when..." conversations that derail sprints.
Increases Velocity: Developers can build with confidence, knowing every state has been considered and designed for.
Lowers Development Cost: Fewer surprises mean fewer costly revisions and a much more predictable path to production.
This level of detail isn't about perfectionism; it's about systematically lowering the cost to supply a robust user experience. In our guide on tools that help optimize pricing pages with AI, we explore how such efficiencies can translate directly into better business outcomes.
The grounded takeaway is to audit your own development lifecycle. Where are your hidden input costs? Are they in ambiguous handoffs, undiscovered edge cases, or inconsistent design tokens? Every one of those friction points is an opportunity. By addressing them, you are not just improving a process; you are fundamentally shifting your product’s supply curve to better meet the market.
Your Next Move: Make the Invisible, Visible
You've seen the map, you understand the forces at play. Now, what do you do with it?
The supply and demand curve graph isn't just a static model for looking back at what happened. It's a tool for deciding what to do next. Your job now is to anchor this big economic idea in the small, tangible reality of your own product.
Forget about trying to plot the entire market. That's a job for academics.
Start smaller.
Frame Your Next Product Debate
Pick one feature your team is wrestling with right now. It could be a new AI-powered workflow, a key integration, or even just a change to the user interface. Instead of letting the conversation drift into a fog of opinions and gut feelings, use the supply and demand framework to bring it into focus.
Ask your team two simple questions:
For Demand: What specific things could we do to shift the demand curve for this feature to the right? This isn't just about marketing spin; it's about genuine user desire. Would a better onboarding flow make it more appealing? Would a clear value prop increase how much users feel it's worth?
For Supply: How can we shift our own supply curve to the right to build this feature more efficiently? This is really a question about your production process. Can we use AI to spot edge cases upfront and cut down on expensive rework later? You can even see how this works in a practical example, mapping all states of a simple task assignment component.
Bringing this framework into your next planning session completely changes the conversation. It shifts the focus from a subjective "what should we build?" to a more strategic "how can we best meet real demand with the resources we actually have?" This is especially powerful when you're trying to connect product changes to financial outcomes. You can even take this a step further and explore AI tools for forecasting the MRR impact of product changes to see how this all connects back to the bottom line.
Your Grounded Takeaway
The most powerful insights don't come from theory; they come from applying this economic lens to your day-to-day product decisions. A friend at a SaaS company told me they started asking, "What's the 'effort price' of this user flow?" That simple question helped them prioritize UX improvements that directly boosted feature adoption.
When you start doing this, you elevate your thinking. You stop just managing a list of isolated tactics and start directing a systemic strategy. You begin to see your product not as a static thing you build, but as an active participant in its own tiny economy.
And your job is to guide it toward a healthier, more sustainable equilibrium.
Frequently Asked Questions
How can I estimate the demand curve for a new software feature?
You can't plot it with perfect mathematical certainty, but you can absolutely create a strong proxy. The goal is to figure out how user desire changes as the "price" changes. And that price isn't just money; it can be time, complexity, or the effort required to use the feature.
Start with qualitative user research and targeted surveys to gauge willingness to pay (or use) at different conceptual 'price points,' like subscription tiers. Then, to get concrete data, run A/B tests. Offer different price points or feature gates to small segments of your user base. Each test gives you a real data point on the graph, helping you sketch out a preliminary demand curve that's actually informed by user behavior, not just guesswork.
What is elasticity and why does it matter for a SaaS product?
Elasticity is just a way to measure how sensitive your demand is to a price change. It answers the simple, critical question: if we raise our price, how many customers are we going to lose?
An inelastic product means you can raise prices without losing a ton of customers. This is common for mission-critical B2B software with few good alternatives. An elastic product is the opposite, where even a small price increase causes many users to churn. Knowing which one you have is absolutely crucial for making smart pricing decisions.
Can this graph help with non-pricing decisions?
Absolutely. This is where the framework goes from a simple economic model to a powerful tool for product and design choices. You just have to think of 'price' more broadly as user effort or cognitive load. A complex, confusing user flow has a very high 'effort price,' which naturally kills demand and adoption.
By simplifying the UX, for instance by clarifying all the possible states in a confusing workflow like this task assignment component, you are effectively lowering the 'price.' You're making the feature more accessible, which in turn increases user engagement. It's a powerful way to prioritize UX improvements.
Stop wasting time on guesswork. With Figr, you can automatically map user flows, discover edge cases, and generate production-ready artifacts from your live product context. Turn product thinking into tangible outputs and ship UX faster. Learn more at https://figr.design.
