Student’s Name
Institutional Affiliation
Cost of Products
| Product | Price | Estimated Cost | Difference |
| Running sneaker | $17 | $14 | $3 |
| Welch’s fruit snacks | $3 | $1 | $2 |
| Pepsi Can | $6 | $4 | $2 |
| Raisin brown bread | $39 | $30 | $9 |
| Brain rules text book | $11 | $10 | $1 |
The notable difference in the profit margin for each of the product is as a result of many combinations. The production cost of a given product is low, but then again the product has to reach the market where the consumer can access the product. Getting the products from the producer to the market place also undergoes a series of actions that makes its final price to be slightly high. There are merchants such as wholesalers who get the products and sell them to retailers who later on then have to sell to the end consumer. In that process, the wholesaler has to make a profit and so is the retailer. The Price of the commodity thus has to go higher to account for the profits the different groups have to make.
The difference is also attributable to the difference in their price elasticity of demand. This is because the demand for different commodities responds differently to the change in their price in the market. Law of demand and supply guides the price of the different commodities because they have different costs and the elasticity of price (Mankiw, 2014). Bread, for example, is always in demand among many consumers, and despite change in price, people will always buy it. The textbook in the above table is not always in demand as it is only a few individuals who might be interested in it.
Competition also leads to differences in price margins. Just that a given product is in demand does not also mean that it is the price has to increase. Good thing there are other chains selling similar products. Thus, one cannot raise a product basing on its demand alone. Competition also helps check the rate by which companies make products. In most cases, many consumers always prefer to go for a chain that sells their products at a price lower than other nearby chains.
References
Mankiw, N. (2014). Principles of Microeconomics. New York: Cengage Learning