Like, who decided a carton of eggs cost 5$, or a specific car costs $50,000? I understand some of it is based on raw materials cost, labor costs, etc.
And big manufacturing companies can have market analysis to determine what price to make profits via supply and demand. But for basic commodity goods like groceries that are sourced from farmers and the like, how did they land on a specific number?
In: Economics
None of it is directly based on raw materials cost or labor costs…it’s all priced at what the seller believes the customer will pay. You hope that’s more than it cost you, and in a highly competitive environment like basic eggs it will be really close to production cost *because* of the competition, but it’s always priced at what the seller believes they can get the buyer to pay. In the long run that will always be more than production cost but it can sometimes be *way* higher.
Pricing is set by the seller. No one person decided that a carton of eggs cost $5. Everyone selling eggs tries to get the most they can for their eggs but they’re all competing with each other. If one seller drops to $4 then the others will two because, for the most part, eggs is eggs and the person selling at $4 will get all the business (until they sell out). That type of decision making happens constantly, all the time, for all sellers. This is why prices change so often.
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