You Control Prices

At least once every day, I hear someone complaining about the high price of something they bought, yet they paid the price and bought it anyway. It doesn’t matter whether it’s groceries, gasoline, or anything else, you control the price you pay for everything. This is a hard concept for some people to grasp, so I’ll explain how it works;

In college Economics 101 they taught us about the “Profit Maximization Curve”. It is actually very simple. A company puts a product on the market at a price they know will sell. Then they gradually raise the price until the sales drop off markedly. Then they drop the price back to a level which produces the most profit. Not the most sales, but the price at which the level of sales makes the company the most profit. This way a company maximizes its profit on the product. This is a generally accepted practice in the free market system.

How does this relate to you? It is simple. The higher the price you are willing to pay for something, the higher the price will go. For example; if you are willing to pay $1.00 for an item but unwilling to pay $1.25 for it, when the price is raised to $1.25 you will quit buying it. This will force the seller to drop his price back down to a price you are willing to pay, or to quit selling the item altogether. Since no one wants to go out of business, the seller will drop his price to what you will pay.

That is how it would work if you were the only one buying this item. Since there are many potential buyers in the marketplace for any particular item, all the potential buyers must be taken into consideration. As long as a sufficient number of people are willing to pay the price, the price will continue to rise until the number of people willing to pay the price drops to a level that causes the seller to lose money from reduced sales. Then the seller will be forced to reduce his price to recapture his share of the market.

You as an individual cannot single-handedly control prices but, you as a part of the buying public can and do control prices to a large extent. No, you cannot force a seller to sell things for less than they cost him to produce, he would be out of business quickly, but you can force him to sell his products at a reasonable price.

As an example; what if no one in the U.S. bought a gallon of gas for one week? Do you think the price would go down? Of course it would, and it would go down dramatically. Everybody knows you will never get all the people in the U.S. to quit buying gas for a week, but if enough people would buy no more than they actually needed, it would cut down on gas sales enough to force prices down.

All you have to do is quit going for Sunday drives, instead of making 2 or 3 trips to the stores, get it all done in 1 well planned trip, carpool to work if you can or take the bus, cut out unnecessary trips. It isn’t that hard to figure out how to save gas and it works with other things, too.

There you have it in a nutshell. You both as an individual (the buying public is composed of many individuals just like you), and as a member of the buying public, have the ability to control prices. You can choose to exercise this ability or not. It is up to you. Either way, you’ve made a choice; you will either commit yourself to do something about these high prices or you will commit yourself to remain at the mercy of continuously rising prices until you can no longer pay them and be forced to do without. What will you choose?

 

 

 

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