Thank you for the opportunity to help you with your question!
The law of demand states that, all other factors being equal, demand will be reduced as the price of a product is raised. It falls to the business owner to find the pricing sweet spot that will capture as much of a profit as possible without causing demand to retract. When the ultimate goal is to be profitable, a close and continual analysis of the supply and demand of every product line is essential to staying competitive in the market.
The supply side of the theory refers to how much of a product a business owner can supply to buyers and at what price. There's no justification for pricing an item artificially low if he doesn't have the manufacturing output to keep up with a spike in demand of people who want to get it at the low price. The exception is if his tactic is simply designed to draw attention to his business, hoping to make enough of a splash that sellers will return for more of the product at a higher price later on.
Please let me know if you need any clarification. I'm always happy to answer your questions.
Jun 27th, 2015
Studypool's Notebank makes it easy to buy and sell old notes, study guides, reviews, etc.