PRICING A PRODUCT

It never dawns on us just how much knowledge we possess. I hear a lot about simplifying our lives. The thought is that by becoming less civilized that our lives will be made simpler. However, your life does not become simpler, it becomes more arduous. Civilization actually makes life simpler and more enjoyable. It becomes simpler because of the division of labor. Within the division of labor, the complexities are worked out and we benefit from this and our lives are enriched.

We do not need to possess exhaustive knowledge just true knowledge as Cornelius Van Til said. This means that we are made wealthy by the knowledge of others. I do not have to know how to manufacture an automobile. All that I need to know is how to operate it. Since I am an end user of the automobile, all that I care about it is that it does what it is supposed to do, provide transportation.

There are many factors that go into making a decision. Each factor must be weighed accordingly. A decision is a unity and the factors comprising the decision are the plurality. Thus, all decisions are based upon the Christian doctrine of the Trinity of unity and plurality. This makes thinking complex by nature. The ability to think in terms of complexity is something that God has gifted us with because we are made in His image.

Being made in God’s image has an effect in the economic world known as the market. Pricing is a phenomenon of the market. Economic decisions cannot be made without prices. Prices are to be rational expressions of the law of supply and demand. Prices have to be determined before offering a product for sale. Prices are an essential feature of the market system. Prices lead to an orderly functioning of the market. Prices allow you to know how much to allocate in your budget for the products that you need.

Prices are established where value is established, subjectively. Prices are objectively based but subjectively determined. The essential point of pricing is what the market will bear. In other words, those in charge of establishing prices do so based upon what they think they can get for their product. Those who establish prices have to have a feel for the market they are servicing. They have to be aware of the market conditions in which they operate. Pricing can be considered an art rather than a hard science. Production costs establish a starting price. Production costs are objective but they are not the final price.

Entrepreneurs operate more based upon their gut instincts rather than any hard science. Entrepreneurs are not academics. They are doers and accomplishers and market makers. They do not follow text books. Entrepreneurs have their money on the line. Therefore, their pricing must reflect the market conditions in which they operate. If they set the price too low, they will sell a lot but not make money and if they set the price to high, they will not sell enough. This is why when determining price, there are many factor to consider, making it complex. Consumers benefit from entrepreneurs dealing with complexities and offering a price for their product. This simplifies things for the consumer.