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Politics : Libertarian Discussion Forum
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To: Mama Bear who wrote (4016)8/13/2000 5:41:44 PM
From: Don Lloyd  Read Replies (1) of 13060
 
Barb -

[...The market will bear what the market will bear, and I don't think a prudent business ever charges a penny less....]

The price charged is limited on the upside by two things.

First, while a business can charge any price it wants, it can't normally force anyone to pay that price. Even a complete monopoly seller serves its own interest by increasing total demand by reducing the price to the point where total revenue no longer increases, and starts to turn down, i.e. the point where the price elasticity of demand falls to unity.

Secondly, in a truly free market, there are no legal barriers to entry thrown up by the government, or illegal ones permitted by the government. Thus, to maintain its market position, a business must price so as to limit the ROI of any potential competitor to an unattractive level.

Regards, Don
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