So there's no reason for it.
yes dear there is a reason. If demand for bananas is high at a certain price seller will raise the price for the reason of making more money.
Do you understand now???
Is it that the seller should be able to raise that price out of greed based upon that demand, or should there be price controls that protect the consumers from the possibility of greed driven market places or bubbles created out of greed when people position themselves for the next big thing ? Do you think people should be vulnerable due to the greedy controlling the markets or do you believe in there being equalizing powers that can curb the appetites of the greedy from being able to gouge us to death, and then shaking the nation to it's core? I mean as big as these corporations have become, if they decide to do wrong, then they can shake or rattle this nation badly. I don't agree with ignoring this these days, because we see what happens when we do. Now with that said I don't agree either with crooked government seizing on opportunities to somehow make slaves out of us all neither.
I don't like the mess that is made when greed driven corruption goes out of control or when government uses it as an excuse to fundamentally change this nation into something worse either.
I know that this isn't asked if me, but I want to say something about it.
I disagree that prices are set by supply and demand, generally. Most prices are administered, that is they are set based in a manufacturer's costs plus a desired markup, which will always be above the price that would be set by supply and demand under perfect competition.
The supply-demand pricing model is actually a model of perfect competition, which is an idealized model which is impossible. It's theoretically only used to teach market principles, but most people walk away with the idea that markets really work this way.
In the model of perfect competition, an infinite number of buyers and an infinite number of sellers negotiate sales in an unrestricted market over goods and buyers which are homogeneous, so that a buyer who does not get the price he wants can go to another seller without losing any utility or incurring any additional costs, and sellers can always find another buyer at the market equilibrium price. Since all of these conditions hold, the price will always adjust to a point where the supply and demand curves meet, which happens to be where the seller's marginal costs equal his marginal revenue. Marginal costs are assumed to be u-shaped, that is, after falling as fixed costs become spread over more goods, they then begin to rise as variable costs rise. This assumption is necessary because it limits the size that a firm can become, preventing monopoly (it has no basis in fact, but if you want to claim that a free market prevents monopolies, you have to make this assumption). Marginal revenues are always equal to the demand curve because there are an infinite number of market participants - no matter how many goods are flooded into the market by any seller, it does not affect the total quantity of goods for sale (because they are one of an infinite number of sellers).
This highly stylized model, with all of its ridiculous assumptions, is absolutely necessary if prices are to be flexible enough to create prices based on supply and demand.
In the real world, we firms are not one of an infinite number of firms, and we produce brands - goods that people prefer over other brands. Customers cannot simply find a Big Mac with any supplier other than McDonald's so McD's can charge more for a Big Mac than it would be able to if people could get them from any of an infinite number of suppliers.
McDonalds has a monopoly on its brand, though not a monopoly on hamburgers. When goods are branded, but there are many sellers of different brands of the same thing, we call that monopolistic competition.
Under monopolistic competition, it always makes sense for firms to produce less than they possibly could, in order to protect their price point.
McDonalds could open more stores than it does, but it is more profitable not to. By opening fewer stores they prevent their stores from competing with themselves, allowing them to charge higher prices.
It turns out this strategy is always profit-maximizing. If you manufacture a product, it will *always* be more profitable to manufacture a little less than you possibly could, and by restricting quantity, force customers to pay a little higher price.
If a grocery store is not selling as much of an item as it orders, it does not reduce the price of the item, but orders less of it, so that it gets the markup it needs, and devotes the newly empty shelf space to another product.
So the intuition that we do not get the best prices possible is correct. 70-80% of business administer prices: they endeavor to sell a little less than they possibly could, and sell it at a higher price.
In this sense, the free market does not achieve the efficiencies and benefits that free marketeers claim.
On the other hand, the question of price gouging becomes very problematic. The ability of firms to screw us a little on price also makes them more motivated to compete for market share, which encourages them to innovate and to offer us better products.
Would your life be better if you had a generic phone rather than the Apple or Android which you prefer? Because Apple and Android would not produce the phones they do if they couldn't gouge you a little on price.
All I wanted to say is that it's fairly complex, and the answers are probably more grey than black and white.
