Response to the following problem:
You Decide: Can a company make a conscious decision and set the prices of its products, or does the supply and demand of the market automatically dictate the price?
You were talking to your good friend in the economics department about companies and their pricing strategies. You mentioned a number of models used in accounting, such as variance analysis and ROI, and how these accounting models are helping companies accurately price their products, leading to better financial results. However, your friend disagreed. He believes that all the analysis in the world won't help a company price its products because that is left to the consumer. He said, "The consumer dictates what prices you will charge. It is the law of supply and demand. If you have a product that people want but it is priced too high, they won't buy it!"