Economics : stockpiling and revenue
how the variation of revenue with respect to the stockpiled quantity changes depending on the relationship between the decrease in supplied quantity and the increase in demanded quantity at a given price
when for a given value, people want to buy more and more quantity of a product with the increasing shortage of supply, the suppliers get an opportunity to earn a larger revenue from that product, by stockpiling it.
when the suppliers start supplying a less amount of the product at a given price, it means they are asking for a higher price for that given amount of the product being supplied. now, if people are willing to pay a portion of that increased price for that given amount of the product, the suppliers can make money out of it by earning a larger revenue.
this is mostly the case with products of necessities, like medicines, staple foods, etc. when a less amount of these products are supplied into the market, people panic and start buying a larger quantity of them, that is they start paying a larger amount of money for a given amount of the product as per the wish of the suppliers.
therefore, the higher market price because of the stockpiling, does not bring down the demand as in the case of luxury goods.
depending on the increase in demand with respect to the shortage of supply, the extent to which the product can be stockpiled may vary. if the increase in demand is too low (less than 1 times the decrease in supply) with respect to the shortage of supply, the revenue starts to fall after a certain level of stockpiling.
on the other hand, if the increase in demand is too high (greater than 1 times the decrease in supply) then, more stockpiling leads to an evermore increase in revenue.
In the case of, increase in demand being equal (equal to 1 times the decrease in supply) to the decrease in supply, the revenue increases linearly with the amount of quantity being stockpiled.