uri wrote:
> Are prices really determined by supply and demand or do the sellers of
> the good or service decide the price?
Naive answer: supply demand.
Real answer: mainly the cost of production, if no
monopoly/oligopoly/vanity/regulations/scarce resources/ads-flooding are
involved.
When you sell something, the market price it is always dictated by the
supply - demand.
If the demand is big the price rise and profits are big too. Many will get
into this market. This increase the supply bringing prices down
If the prices goes down so that your production costs are bigger than the
market price you will go out of business. By going out of business, the
supply decrease and prices rise. ....
Long story short: While the market (supply demand) it is the only apparent
factor on the short run, on the long term the price oscillate and
eventually will stabilize itself a bit (1...30% depending on the product)
higher than the average production.distribution costs.
However, there are a number of factors that can screw up the process.
For example, a vanity product it is artificially kept high in order to
provide a "status quo". The same it is valid when idiots are involved who
buy a product because they seen it on a TV commercial.
When a product is scarce by nature, like a collectible item or rare gems
and
you can not have other competitors enter the market, the price skyrocket
too driven exclusively by the supply-demand. The same is valid onto a
market controlled by a monopoly/oligopoly.
Regulations can also alter the price balance either by artificially
reducing
the profits and controlling costs or by providing a state granted
monopoly.
--
The world of the future will be fully democratic or will not be at all.
Democracy Highlander
P.S.:
When I say "democratic", I use the word democratic coming from democracy
not
from Democratic party. I am not connected in any way with Democratic party
and if they fail to do as promised and cut cor****ate corruption I have no
problem to turn on them and blog against them too.
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