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S E21: Market Power - Why businesses charge more

Think Like An Economist

CHAPTER

The Trade Off of Raising Your Prices

If someone relies on their glasses, they'll probably got to the closest place that they can to get them fixed. When you'd raise prices your profit is your profit margin or mark on each unit, multiplied by the number of sales you make. So raising your price means you'll make more profit on each repair, but you'll also have to balance this with how many fewer customers you'll get paying you money for your repair service. The amount of market power you have determines how sharp that trade off is. If you lack market power, you need to keep your prices close to your marginal cost,. However, if you're like martin chacrelly with a lot of market power,

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