Is greed the main reason that prices go up as demand increases?

Question

I mean, when supply is scarce, demand increases. Consequentlly the price then goes up, right?

ok so what is the reason that the price has to automatically go up?
Isnt this simply greed (all moral impliacations aside)

Or in a more sequential/specific sense, is the cause of rising prices ONE persons greed (and then the rest have to match prices to break even)

Is this accurate, in economic sense?

Answer 1

Too long since my last economics course, but....
It is not just greed that drives prices up. It is also the willingness of the customer to pay more to obtain something that is perceived to be in limited supply. If I am willing to sell widgets for $1, but there is a line of people at my door willing to pay $2, I would be acting against my own enlightened self-interest if I did not raise my price.
However, if Ed down the street is, for some reason, like wanting to put me out of business, willing to sell widgets for $1.50, my price increase to $2 will not last.
Pumpkin, no one is holding a gun to your head to make you pay $200 for an iPod Nano. If no one buys, the price will come down.

Answer 2

Meg had a good point, except she should of went with the maximum, demand is never affected by price. Demand can be defined as: being willing and able to pay for a particular good, at a particular prices, ceterius paribus! Demand does not increase when supply is scarce. A lowering of supply shifts the supply curve to the left to a lower quantity and a higher price. Demand is not affected by a shift in supply.

The price goes up because the demand curve shifts to the right. The curves intersect at a higher price and a higher quantity. Rising prices isn't greedy always. In most markets, somewhere between perfectly competitive and monopoly, but, obviously more toward perfectly competitive, a company raises a price only when input cost increase or they perceive the demand curve as shifted to the right. Your arguments had no economic sense at all.

I wouldn't go as far as call it GREED. Adam Smith called it self interest. I think his description was apt.

Punkin: are you sure 'their' lying? LOL, it's they're. 'Their' is possessive. e.g. Their toy is fantastic! They're is a contraction for they are: They're on top of the world!

Answer 3

For most things demand ( which is the amount people want) is not effected by price, but the amount they buy is. The price is determined the the intersection of the supply and demand curves. However if something is very scarce, it can become status symbols and the higher the price the more status one gets from owning it, so people want it more, original paintings, huge diamonds, and high status residential neighborhoods are examples. For things where production can relieve the scarcity a price rise will stimulate more production so the price and status of the item will fall, We see this when a new high tech gadgets enters the market, like the I- Phone.

Answer 4

No... Your scenario creates an opportunity for new individuals/businesses to enter that market. Once enough people/businesses join in, everything returns to equilibrium due to the price competition among the various businesses. That's why the government fights against Monopolies... in order to create fair price competition in the markets for the benefit of the consumer.

Answer 5

Greed is the reason everything is like it is and if anyone tells you different,their lying!Yes,Frodo59,its still called greed,when you want more just because you can take advantage of people and get it,what else can you call it?

Answer 6

supply and demand. greed will only work for some time (ie: stock correction after the boom days), but for most things it is just that, supply and demand

Answer 7

That is how it works. Voters pushing to raise minimum wage also contributes to inflation. If minimum wage goes up, so does the cost of a cheeseburger! The economy always looks out for the big whig scammers to come out making the cheddar in the end!

Answer 8

No!
Prices usually rise because the costs of production rise.

The current higher cost of most food in the U. S. is a direct cause of higher gas prices, higher wages paid, and many foods being shipped long distances.....Plus higher light bills, higher property taxes & license fees, higher packing costs, etc......All these added costs are added into the final products that you & me buy.
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