If you are in business, then you will know how difficult it can be to get the price right. Get it wrong in either direction, and you can soon be out of work. One of the reasons why pricing is so difficult is that it is nothing like the objective science it might appear to be. Value, and therefore price, is subjective; put differently, there is such a thing as the psychology of price.
Classic economists would probably dispute this. Price, they would say, has to do with supply and demand. This basic economic law does explain quite a lot. It explains why water, which is vital to life, is effectively free, while diamonds which we cannot eat or drink cost so much money. The reason is simple. In this country, water is everywhere. It falls out of the sky as rain. If diamonds fell out of the sky in the same way, we would be sweeping them off of our sidewalks and throwing them away. If you look at how this law applies in the real world, the actual causal relationship is not so clear.
For most of us there is an interaction, and not a logical one, between worth and price. Its consequence is that things are not so much priced in terms of what they are worth; they become worth what they are priced. This is why people will pay so much for designer clothing. These clothes are much like any others but they assume a worth proportional to their cost, and are priced accordingly. This explains why such clothing has to have its labeling on the outside. It is the only way that worth can be proclaimed once the price tag has been removed. It becomes part of the signaling system we use in our society to broadcast items.
Here are some interesting and informative websites about price:
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