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How are prices set in a market?

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The most important question in any market is the setting of the price. Economists since the days of British economist Adam Smith (1723Ð1790) have noted that prices tend to fluctuate with supply and demand. If, for example, a farmer offers his crop of wheat for sale at a given price and no one buys, she or he will lower the price to try to attract buyers. On the other hand, if there is a scarcity of the product, sellers will be able to charge more for it. In this way prices are set for thousands of products in many markets every day.

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