In article <44a47e90-952f-4bed-a6a1-
7fa7acc74ab4@[EMAIL PROTECTED]
>, danny99@[EMAIL PROTECTED]
says...
> Are prices really determined by supply and demand or do the sellers of
> the good or service decide the price?
Both. Partly depending on the particular good or service.
For example, if I try to sell a non-essential product at an
excessive price, then I might not get enough customers to even
recoup my overhead costs (e.g. the fixed rent on a storefront.)
Therefore, I would look for "sweet spot" of the highest price
that doesn't turn off too many prospective customers.
The point about being "non-essential" is im****tant, because
consumers can reduce their demand relatively easily. I can
charge the prices that a sufficient number of people are willing
to pay, but cannot charge more.
On the other hand, a seller can encourage a psychological vibe
that enables higher prices. Which is why there is a lower price
for a plain t-****rt, and a higher price for a similar ****rt with
"Tommy Hilfiger" printed on it. Even though both ****rts might be
of identical quality.
The overhead issue comes into that, too. The manufacturing cost
of the "Tommy Hilfiger" ****rt is higher, due to paying a
licensing fee for the use of the name and logo. Thus the seller
has to charge more, to recoup that overhead.
Also, some consumers tend to assume that, a higher priced item is
automatically superior. And thus, that price itself can attract
willing buyers.
These factors relate to why "brand-name" food is priced higher
than generic/budget-brand food. Despite the fact that, some such
items are produced in the same facilities, with identical
ingredients.
The other side of the coin is essentials. Stuff that nearly
everybody MUST buy. Food, shelter, electricity, petrol. While
customers can cut back to some degree, it is a lot harder. And
there is generally a minimum floor of consumption.
It is easy to say, "I won't buy that plasma TeeVee, because it is
too expensive."
But food, shelter, and electricity, are potentially
life-and-death level purchases. And petrol may be necessarily to
get to your job, or to accomplish that job (to earn money for the
other essentials.) Thus, the sellers can increase the prices a
large amount, while the buyers continue to buy.
I am sitting here in my home, with a water tap just a few metres
away, plus one month's worth of water stored for emergencies.
Therefore, a seller couldn't charge me anything for a glass of
water. Because I can set the price at zero, on the basis of my
(non-) willingness, and my alternatives.
But, if I were dying of thirst in the desert, then a monopoly
seller could set the price of a glass of water at one hundred
percent of my ability to pay. If I had a million dollars in my
briefcase, then s/he could charge me that much, and I would most
likely fork it over.
Although, of course, the real, everyday world is always in the
grey area between those two extremes being pulled somewhat in
either direction, depending on the specifics.
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