I have a personal story about my second-hand Schwinn 10-speed Varsity, which I bought for $50 back in 1973. The price was right—the seller needed to part with it quickly, and I was looking for an affordable way to get around. It was a classic example of supply meeting demand: the seller needed cash (supply), and I needed transportation (demand). But let’s dig a bit deeper into this idea of supply and demand, because the creation of the Schwinn Varsity wasn’t just about one transaction—it was a global, multi-step process shaped by those same forces.
Why even make a bike like the Schwinn Varsity? It wasn’t just because bike enthusiasts wanted it (though that certainly helped). To build it, Schwinn needed to source raw materials, secure labor, design the bike, and then manufacture it—all of which came down to a careful alignment of supply and demand.
Let’s talk about the basic “ingredients” of the bike. A Schwinn Varsity is made of a mix of materials, each sourced from different parts of the world:
Steel for the frame and components.
Aluminum for lightweight parts like wheels and handlebars.
Rubber for the tires and grips.
Plastic for pedals, reflectors, and some parts of the braking system.
Leather or synthetic material for the seat.
Chrome or nickel for the finishing touches, like handlebars and rims.
Glass or plastic for the reflectors and lights.
Where did these materials come from? The steel might have come from the U.S. or Japan. The aluminum could have been mined in Australia or Canada. Rubber? Most likely from Southeast Asia. In the 1970s, countries like Saudi Arabia were providing the synthetic rubber for tires.
Now, think about the thousands of people involved in the production chain. Miners dug up the raw materials. Transportation workers moved them across countries. Engineers and factory workers at Schwinn’s plant in Chicago then assembled all those materials into the final product. All these people, each getting paid for their role, were helping turn the demand for bicycles into a supply of Schwinn Varsity bikes.
Then there were the designers who made sure the bike was as functional as it was stylish, and the marketing teams who crafted the ads that made us want one. Why did all these people get involved?
Because they were responding to demand. The laborers needed jobs, suppliers needed customers, and designers wanted their work to be seen. Everyone in the supply chain had a role in creating something people were willing to buy—and Schwinn knew there was a demand for bikes that were stylish, practical, and affordable.
This brings us to the pricing system. The price I paid for the bike in 1973 wasn’t random. It was the outcome of all those steps: the cost of the raw materials, the wages for the laborers, the cost of transportation, and the marketing efforts to sell the bike. It all had to balance out. Schwinn wasn’t going to charge too much, or people wouldn’t buy. They weren’t going to charge too little, or they wouldn’t cover their costs. The price of the bike reflected everything that went into making it—from mining the steel to assembling the final product on the factory floor.
So, that’s the story of my used Schwinn Varsity. Back in 1973, I didn’t think about all the steps that went into making that bike. I just knew it was a great ride for an affordable price. But looking back, I can see that the law of supply and demand was behind every part of it—the materials, the labor, the design, the pricing.
It’s what creates the pricing system and drives the creation of the products we use every day.