Why can the demand side and the supply side be treated differently by the financial market?

Yesterday I said that the demand side and the supply side could be treated differently by the financial market, today I want to talk about why the demand side and the supply side can be treated differently by the financial market.

The basic reason is the supply side and the demand side have different levels of risk. The majority of the demand side borrowers are individuals and their main purpose for borrow is to buy some consumer goods and services, which do not produce further incomes in the future. Moreover, most of these goods and services have depreciating value trends. In addition, individuals do not produce secure income increases and the value creation ability of individuals is not as strong as the ability of many companies. On the other hand, although some companies may not have sufficient cash to pay back their loans, they have many assets that can provide more security for their creditors. In addition, the amounts of the loans taken by companies are much greater than the amounts of the loans taken by individuals. Making several small loans is not as preferred as making a big loan to banks, as making several small loans need more work and has higher costs.

Overall, as lending to companies is less risky and more cost efficient, the banks and financial institutions are more willing to lend to companies rather than individuals. Therefore, the supply side is easier to borrow loans. When the supply side has access to more financial support, they can expand their supply, this can potentially increase the market supply and lower the price level. However, sometimes, as companies avoid to enter price competitions, the market supply can change to a relatively insignificant degree.