Auction flood vs scarcity

Perhaps the veteran gold makers can chime in here to help me with this.
Supply and Demand drive the prices of world economy.  Supply and demand can also drive the our prices in WoW.

The concept for this post came from my wife.  I was bargain hunting this morning when I came across an item.  Before I executed the buyout I noticed that the person placing the item on the auction was....my wife.

I called her on the phone and asked her about the auction.  I explained that the item could fetch her nearly 1000g when it sold and she had it listed for 25g.  She told me that she had listed the item three times and she was tired of seeing it return to her mailbox.

Disclaimer #1: She doesn't use TSM.  She doesn't use any tools aside from auctioneer.  She is still waiting for me to become a gold capped before she invests her effort in the gold making side of the game.

This got me thinking about the market.

One of the things I have noticed is that there is a point where the market is flooded and a point when a market is scarce.
By flooded.  Looking at the market for Green Tea Leaf there are nearly 200 auctions on my server.  The vast majority of those someone tossed it on the AH, not to make money just to unload it.  They will get a few copper more than when they vendor it and so they want that few copper.

In the process, they are damaging the market.  The are flooding it with undercuts and without a care about damage to the economy.  In some cases, we will swoop in on these individuals, we will start buying up the severe undercuts until we reach a point.  Sit on the items and wait for the next few to just cast the item on the market and once again move in to buy up the bottom.  I know I will never get rid of the bottom.  In the end, they are not my customer.  I will create stacks of 20 of items like Green Tea Leaf and then resell it at market.  Some inscriptionist out there isn't looking to purchase the bottom of the auctions anyway.  They just want a stack of 20 Green Tea Leaf to make their ink from.

Potions for the most part feel the same.  Depending on the potion, depends on how much of the market I will buy up to create stacks of five or resell the singles.

The mats market on my server is different than the armor/weapons market.

There is a bargain for an axe, it is currently trading at 44g.  It is one of four that are trading at the same price.  Do you buy all four and tie up 176g to maybe make 2000g (500g/ea) in the near/far future.  Is the market for this axe flooded?
I back away from deals like this often.  I don't feel comfortable as a newbie tying up gold in a maybe against this market.  However, if it was one of two, I would buy one and wait for the other to go before I listed my one.

How and when do you determine if a market is flooded?

Flip the coin over and we deal with scarcity.  Like the item my wife was selling on the AH.  There were no buyers for this item.  It sat and sat and sat and sat.  She was burning more money posting it and she was getting tired of posting it.

When is a market for an item considered "scarce"?  When is something not worth the global market value on your server and you just want to unload it for bag space or just recoup some of the investment?

That really depends on your server.  RP servers may have Xmog gear fetch better prices and sell faster.  While PvP servers will burn through certain potions and gems faster.

For the 200 items I have listed on the AH, I may sell one or two xmog a day, since I play on a PvE server.
Scarce market for xmog.  Most are interested in gems, potions, mats and raiding gear.

How do you determine if a market is scarce and you should stay away from it?

I am noticing across the three server types that I am playing on.  PvP, PvE and RP.  That each one brings a different need and with that need a different set of auction rules.

With the disjointed realms/world.  Having tools such as WoWunction give us GLOBAL averages may not be a good thing.  Perhaps it should average against like servers.  What is the average of this item ONLY on PvE servers?  What is the average of this potion ONLY on RP servers?

We may see an adjustment to our global pricing structure allowing us gold makers to make more informed purchasing AND listing decisions.

If these tools already have the ability to display PvE/PvP/RP type servers only - can someone please school this newbie in how to do that.

Food for thought.

-AuctionWench