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
Supply and demand. Eggs are a good example.
Let’s say you have 100 cartons of eggs to sell every day, and you price them $10 each. No one buys them and you’ve made 0 money. The next day you’ve priced them $2. In 3h you’ve sold them all and made $200. There was such a rush on the eggs that you believe you can sell them for more than 2. The net day you price them at 7 and you sell 60, the day after you price them at 4 and you sell out. Then at 6 and you sell 80, then at 4.5 and you sell you out again.
You repeat this a few days, tweaking the price further down, until eventually you price them 4.8 and you sell 99 out of the 100 in a day. You know that you couldn’t sell more that day, otherwise the last carton was sold as well, so you got the maximum price for it and made the most money.
The price of a carton is now established at 4.8.
Then there are 1000 more factors that go into this that makes it go beyond eli5.
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