Question

Explain how self-interest and competition work together to regulate prices.

Answer 1

Answer:

- Self-Interests exist in both customers and the companies who sells the product.

Self-interest held by the companies will determine how much profit that they desire to acquire. Some owner wanted a high profit margin, some wanted lower , etc.  Self-interest held by customers will determine the type of value that the consumers expect from the product and how much money they're willing to pay to obtain it.

Both of this will create a push and pull in the market. Eventually, the price will fall to the spot where both sellers and consumers believe as 'fair.'

- Competition is an additional factor to regulate prices that tends to be beneficial for the customers.

The existence of competition make consumers have more than one option in order to obtain a similar product. This make companies have to reduce their self-interest and offer prices that can compete with the competitors.

This tend to bring the prices lower from the initial equilibrium.

Answer 2

Answer:

- Self-Interests exist in both customers and the companies who sells the product.

Self-interest held by the companies will determine how much profit that they desire to acquire. Some owner wanted a high profit margin, some wanted lower , etc.  Self-interest held by customers will determine the type of value that the consumers expect from the product and how much money they're willing to pay to obtain it.

Both of this will create a push and pull in the market. Eventually, the price will fall to the spot where both sellers and consumers believe as 'fair.'

- Competition is an additional factor to regulate prices that tends to be beneficial for the customers.

The existence of competition make consumers have more than one option in order to obtain a similar product. This make companies have to reduce their self-interest and offer prices that can compete with the competitors.

This tend to bring the prices lower from the initial equilibrium.