Supply & Demand 101: Learn the Basics of U.S. Truckload Market Economics
You don’t need a degree in economics to be successful in logistics. But having a basic understanding of the fundamentals will help you stay ahead market trends and set a better strategy. Let's go back to econ class for a quick recap on supply and demand and dive into few essential freight market indicators.
Understanding the Basic Principles of Supply & Demand
Supply and demand are basic economic principles that examine the relationship between the amount of goods or services available and the number of people who want to buy those goods or services.
While typically referenced together, supply and demand are two separate economic laws that govern market trends.
The Law of Supply says at higher prices, sellers will supply more of a product or service. The Law of Demand says at higher prices, consumers will demand less of a product or service.
How to Read a Supply Curve:
The supply curve shows the relationship between price and quantity supplied. It is indicated by an upward slope on the graph
One of two things can happen on the supply curve:
When the price of a product increases, sellers
manufacture more of that product to increase their
profits. In the case of the truckload market, as rates
rise, more carrier capacity enters the market as
existing carriers build up their fleet and new carriers
seek to enter.
As prices fall, sellers manufacture fewer goods
because production is no longer as profitable. In the
case of the truckload market, as rates fall, carrier
capacity leaves the market as margins shrink.
Here's how to look at a supply and demand curve
applied to truckload market dynamics. If either line
moves to the left (a decrease) or right (an
increase), you can see how the equilibrium price
point (i.e. current spot rates) moves to meet the
In the truckload market:
Supply = carrier capacity (trucks & drivers)
Demand = truckload volume (shipments that
need to move)
Supply Exceeds Demand
When there are more trucks/drivers than available
shipments, rates go down. Because carrier capacity is
high and truckload volume is low, this is known as a
“loose” market — or shipper’s market, since rates
Demand Exceeds Supply
When there are more available shipments than trucks/
drivers, rates go up. Because truckload volume is high
and carrier capacity is low, this is known as a “tight”
market — or carrier’s market, since rates favor
Supply & Demand Are Equal
When the amount of shipments and available trucks/
drivers are balanced, the supply and demand curves
intersect. This is known as market equilibrium.