Yes, the theory takes livestock demand into account. Yes, of course people want their Nemo. But the Law of Demand states that more people will want Nemo at $15 vs $30. That's hard to argue.
I didn't know either of those 2 stores that you mentioned were losing. Do you know for sure this is the case? I thought both stores are profiting.
In all of my years of studies and research, I have not found any theory that says you can make more revenue by artificially raising prices of goods in a perfectly competitive market.
If it is certain that prices are artificially low, then yes of course the businesses are not maximizing their revenue and will have more demand than supply and will eventually raise their prices.
Firms enter the market to make money and exit when they can't. No doubt. If prices are low because there is too much supply (too many pet shops) then having a store lose and exit the market is inevitable.
In those other regions that you point out, prices and demand are high. But that creates a new business opportunity for a new store to enter the market and get a piece of the pie. Eventually, when more competition is created, prices will also go down. Its all part of Business and Economics.
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12-24-2003, 07:57 PM
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