In the market, this is referred to as “price elasticity”. The basic concept of it is: if you charge less, you sell more, and can increase profits. There’s obviously limits to this (which are largely unknown) if you charge so little that everyone who would buy your product is buying your product, then reducing costs any more than that, will result in less profit. So there is a “sweet spot” of pricing that returns the most money.
I learned about this more than a decade ago and what I was taught at the time was that there were very few items that are generally considered to be very inelastic for pricing: petrol (gasoline), booze, and tobacco. Gas, because everyone needs to drive, booze because drunks are going to drink, and tobacco because nicotine addiction. Even then, there’s still some elasticity in the pricing, more so as time marched on; stuff like hybrid cars, work from home, etc, for gas, booze, with the availability of (kind of crap) liquors that are priced accordingly, and the force of the anti-smoking campaigns/concepts/etc.
Other things were always considered far more price elastic, like food. During and after the pandemic, options for purchasing food were limited, so they fell into a more price inelastic status, since demand didn’t change, but supply became more limited. I’m sure more than a few things like farmers markets, became inaccessible. The people who would be using such inexpensive options were suddenly forced into buying from grocery stores and price fixing and gouging was more possible; not dissimilar to how gas prices work. Each location would raise prices to match whatever their “competitors” were doing.
Now that people have started to find alternatives, either by growing a portion of their groceries, or finding less expensive alternatives or simply buying less, companies are trying to find where the “sweet spot” is for maximum profits.
This isn’t a new thing, nor is it unique at all. It’s the reason that booze, gas, and tobacco have some of the highest tax costs of any products. If companies/government/producers believe they can charge more to earn more profit overall, they will. What’s happened is that they dug so deep in raising prices that profits took a dip. They’re selling each unit for more profit, but so many fewer units that they make less overall.
It is the way of capitalists to find the highest price that people will pay and still buy a thing.
They have clearly gone too far, and it has cost them their precious profits.
In the market, this is referred to as “price elasticity”. The basic concept of it is: if you charge less, you sell more, and can increase profits. There’s obviously limits to this (which are largely unknown) if you charge so little that everyone who would buy your product is buying your product, then reducing costs any more than that, will result in less profit. So there is a “sweet spot” of pricing that returns the most money.
I learned about this more than a decade ago and what I was taught at the time was that there were very few items that are generally considered to be very inelastic for pricing: petrol (gasoline), booze, and tobacco. Gas, because everyone needs to drive, booze because drunks are going to drink, and tobacco because nicotine addiction. Even then, there’s still some elasticity in the pricing, more so as time marched on; stuff like hybrid cars, work from home, etc, for gas, booze, with the availability of (kind of crap) liquors that are priced accordingly, and the force of the anti-smoking campaigns/concepts/etc.
Other things were always considered far more price elastic, like food. During and after the pandemic, options for purchasing food were limited, so they fell into a more price inelastic status, since demand didn’t change, but supply became more limited. I’m sure more than a few things like farmers markets, became inaccessible. The people who would be using such inexpensive options were suddenly forced into buying from grocery stores and price fixing and gouging was more possible; not dissimilar to how gas prices work. Each location would raise prices to match whatever their “competitors” were doing.
Now that people have started to find alternatives, either by growing a portion of their groceries, or finding less expensive alternatives or simply buying less, companies are trying to find where the “sweet spot” is for maximum profits.
This isn’t a new thing, nor is it unique at all. It’s the reason that booze, gas, and tobacco have some of the highest tax costs of any products. If companies/government/producers believe they can charge more to earn more profit overall, they will. What’s happened is that they dug so deep in raising prices that profits took a dip. They’re selling each unit for more profit, but so many fewer units that they make less overall.
It is the way of capitalists to find the highest price that people will pay and still buy a thing.
They have clearly gone too far, and it has cost them their precious profits.