Supply and demand determine price in the marketplace. In an ideal situation, supply will exactly match demand. In this scenario, there is no surplus or shortage of a product, allowing profits to be maximized. If supply increases and demand doesn’t, prices will drop because there will be a surplus of the product. Lowering prices will help end the surplus. If demand increases and supply remains the same, then prices will rise because there isn’t enough of the product available. When a shortage of a product exists, prices will rise.
In late summer, car prices tend to drop because car dealers want to sell the current year's model of cars to make way for the next year’s model of cars. Since the supply of cars increases, the prices drop to encourage people to buy cars. In late August, the prices of Fall clothing tend to be higher since the demand for Fall clothing increases. However, in winter when the demand drops, prices of Fall clothing will also drop.