How is the market price of trash bags created? Are all other home goods taken into account?
In: Economics
The market price of trash bags is created in the same way as the market price of anything. The process is really simple, and can be illustrated by a short example:
Imagine you have a trash bag and a bunch of people want to buy it from you. Who do you sell it to?
You sell it to whoever will pay you the most. You don’t do research to see how much they are paying for other stuff, you don’t consider what they are using it for, you don’t look at a thousand other things tangentially related to trash bags. You are exchanging a trash bag for money, you want as much money as you can for your trash bag.
People with money who want a trash bag in turn are trying to get a bag while spending as little money as they can. In combination these two competing forces eventually equalize at the market price of trash bags.
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