How do companies make money by selling products at a low price and competing with other companies?

Question

Like for example if it is like a tech company like maybe HP, DELL, ASUS, ACER and they make laptops cheaper then how do they make money because they lower the price of their computers

In: 6

Answer 1

You sell computers for $300.

You spend $200 on the computer.

So you make $100 per computer.

You sell 10. So you made $1000.

You drop price to $250.

You sell 30 computers now.

You made $1500 this time.

Companies find the point where their product maximizes profit. You can’t sell for less than $200 or you make $0. But if you sell more than $300 almost no one buys any so you make no money.

Some companies will try a loss leader which is a product sold for a loss but you end up buying other stuff when there. Like if McDonald’s sold a 8 piece nuggets for $.50. They might lose money but they are getting most people get fries and a drink while there as well so they make money.

For computers and computer parts most items are way cheaper at the OEM level. Dell pays significantly less for parts than you will pay. Things like windows 11 will cost almost nothing to them compared to retail purchasers.