For a while, Southern Brewers is the only coffee supplier in the market. Eventually, Albert Coffee enters the market and sells c
offee at lower prices than Southern Brewers does. Later, Café Brites enters the same market with lower prices for coffee. Southern Brewers now charges lower prices than Albert Coffee and Café Brites do. What made Southern Brewers lower its prices?
In this case, the reason why Southern Brewers decided to lower its prices was because of competition. When Southern Brewers was the only supplier of coffee in the market, they had a lot of freedom in establishing the price because consumers did not have a lot of options. However, as more coffee shops enter the market, Southern Brewers needs to lower its prices in order to remain competitive.
Well, (the way I see it) when Southern Brewers was the only coffee supplier in the market. They could have prices as high as they'd liked, where else would people get good coffee. And so, Albert Coffee than comes along charging less than the leading supplier. And than Café Brites comes and marks their prices lower than the both of them.
Southern Brewers had to lower prices in order to keep up business. People are more apt to buy low cost idems. So if they wanted to continue being a top supplier, they needed to lower prices.
