Now, suppose you make and sell hot dogs. You are in business in a corner of a busy road.
What is the guideline for hot dog pricing?
The price of one hot dog is such that a child can buy it with pocket money. Or it’s the amount of money left in the bottom of an adult’s pocket.
You baked a thick sausage sandwiched between plump breads. You have too much ketchup and your hands are bright red. Sweet smell!
But for some reason it’s not selling well. This is a problem. what will you do?
Is it possible to expect profit even if the selling price is halved?
That’s right. Let’s discount
Cut the price of hot dogs by half. Don’t worry. If more than double the number is sold, there will be no loss even if the price is halved.
In fact, no passerby misses a half-price hot dog. Fortunately there is a lot of traffic.
So what if the traffic is low? Even a half-price discount on hot dogs may hurt sales.
It may be surprising, but in that case, let’s double the selling price.
Of course, no one would buy a terribly expensive hot dog. No, to be precise, the number of customers who buy it will decrease.
everyone thinks it’s unreasonable
The game starts from here. If the number of customers reduced by about half buys hot dogs, the selling price has already doubled, so there will be no loss in total sales, in theory.
Of course, everyone thinks it’s unreasonable to set a high selling price when a product doesn’t sell. But that’s because we overconfident that business is about making money.
If you don’t forget the balance of supply and demand and only aim for no loss, there is no profit but no bankruptcy.
Customers always care about prices, but sellers should care about equilibrium.
When people are hungry, when they see a delicious hot dog, they want to eat it. We don’t really care about the price. If you look in your pocket, you’ll have a little coin left.
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That’s all for today’s post. Thank you
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