Can Demand & Supply Explain Long Queues at ATMs?

From Econs 101, we learn that the demand and supply model is designed to capture the intuitive aspect of how a market works, and then used to describe how prices will fluctuate in a particular economy. The model, though simple, can be used to determine almost anything – equilibrium prices, wages and even exchange rates.

The relationship between demand and supply reflects the forces behind resource allocation. In market economy theories, resources are always allocated in the most efficient way.

Quick Recap!

Demand refers to the quantity of products (or services) desired by the buyers. A higher demand will lead to higher prices, thus the demand curve is downward sloping. Supply refers to the quantity of products (or services) supplied by the producers. Higher market prices lead to increases in supply, thereby giving the supply curve an upward slope. When both curves are put together, the cross intersection, better known as the equilibrium point, is where the demand and supply are equal. At this point, the market is functioning most efficiently, since resources supplied is the same as the amount demanded.


Can we tweak aspects of the model to explain the long queues found at almost every ATM during Chinese New Year?

Chinese New Year (CNY) may be one of the busiest periods for banks in Singapore. Every year, long queues can be found forming in front of banks and automated teller machines (ATM). Two weeks before the festive, people queue up to withdraw cash for red packets* that are to be distributed during CNY. On the day of Li Chun**, people queue up again to deposit money into their banks as there is the belief that depositing money on that day was auspicious and would ensure wealth and prosperity.

*Monetary gifts that are given to the younger generation during CNY.
**Start of Spring, and believed to be an auspicious day.

long queue
Long queue at Yishun Central POSB Branch, 2015.

Now if we were to look at this situation economically and plot it into a graph, here’s a few things we need to change in the basic model. Instead of looking at prices, we measure the waiting time of individuals before they can use the ATM while the X-axis reflects the number of ATMs available for use. The demand curve plots a user’s willingness to wait. We can see that the market is far from its equilibrium point.


The CNY period thus become a shock as it causes the market to deviate from its original equilibrium point. The upward movement of the demand curve while holding supply constant does not only lead to an increase in waiting time, but also led to dead weight loss in the market. Assuming everyone in the market would have preferred to deposit money on the same day but each individual has his/her own willingness to wait, those who had less patience would skip the queue and went home to sleep instead. The next time you see long queues at ATMs and decide to postpone your choice to use an ATM, remember these people have more patience than you!

The next question to consider is, is the shift in demand always that high every year? The answer is no, not anymore. In a Straits Times article on 25th January, banks are making use of technology to reduce waiting time for consumers. This reduces waiting time as consumers can reserve the cash in advance and head down to bank branches for collection. The demand curve would shift downwards slightly since bulk of the demand for ATM services come from the money deposit practice on Li Chun, which cannot be done over the application.


With the new shift in demand curve (D2), the waiting time is reduced and dead weight loss is lesser as technology progress sieved out people who could do without engaging the services of an ATM. Increase in pop-up ATMs (not plotted in graph) will shift the supply curve leftwards, which also reduces waiting time and dead weight loss.

Can More be done to completely eliminate waiting time?

There are only two ways to reduce waiting time, reduce demand or increase supply. Given the local culture and their strong beliefs, we know that reducing demand might only happen in the long run, therefore making increasing supply our only solution. Increasing the supply of ATMs cannot be a permanent solution either, since there is always a limit to the quantity businesses are willing to supply before the marginal costs gets higher than the marginal benefit. As such, the current solution can only reduce waiting time to a certain extent and cannot yet completely eliminate said waiting time.

Should we be explaining ATM queues with the supply-demand model?

Unlike prices or wages that are usually constant for some periods of time and its fluctuation cannot be tracked by the naked eye, ATM queues fluctuate frequently and can be observed if you walk to it. The example of ATMs employed in this article serves to illustrate how a demand and supply model can be used to explain many daily phenomenons that we see but are much oblivious to. Think about it, how often do you see the ATMs being fully utilised on an normal afternoon? In fact, the waiting time seems to always be on two opposites of a spectrum – crazy long queues or eerily empty.

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