Question

You meet a friend of yours for lunch. He is a supplier of coffee machines. While talking business, you mention to him that you've decided to use the principles of supply and demand to determine the market price for the coffee you plan to sell at your kiosk on campus. He suggests that you're making a lot of work for yourself, and you should just set your price based on the prices charged by your competitors.
However, you're apprehensive about using that approach.
Which would be the best argument in favor of your decision to use the principles of supply and demand

Answer 1

Answer and explanation:

There are several factors to be considered at the moment of setting the price of a good or service that is going to be offered. Raw materials, production costs per unit, and labor are the most common. However, setting the price based on the competitors seems vague. An organization cannot depend on this matter strictly of another organization since the reasons for getting to the competitors' price is unknown.

Basing the price of a product based on demand and supply could be a good option. It will imply the price level will fluctuate according to market requests. By doing this, companies make sure to keep their expected revenues almost the same regardless of what competitors might be doing.