Chapter 17, Question 3.1: Explain the role of supply and demand in determining price.
The price marketers set for a product depends mostly on two factors: the demand for the good or service and the cost to the seller for that good or service. When pricing goals are mainly sales oriented, demand considerations usually dominate.
If there is no demand for a product, the manufacturers and retailers will likely reduce the cost to reduce inventory. If supply is low and demand is high, the price could potentially increase but would definitely at least stay constant until demand begins to decline. Price equilibrium occurs when demand and supply are equal.
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