How a price is found

Every market has a buyer and a seller, and they must agree on a price for a sale to happen.

Price is the amount at which a buyer is willing to buy, and a seller is willing to sell. It needs both: a price nobody will pay isn't a price, and neither is one nobody will accept.

Often they bargain to reach a price both accept. You've seen it: the seller says ₹200, the customer says ₹100, and they settle somewhere in between.

Take guavas. The seller wants ₹80 a kg; buyers think that's too much and offer less. But too little, and the seller makes no profit. They bargain until they reach a price both agree on. If they never agree, there's no sale, and both go home with nothing.

The book shows three cases:

From these, the seller learns roughly how many guavas buyers want, and can bring the right amount next time. Unsold fruit tells him he brought too much, or asked too much.

Over time, the amount sellers offer and the amount buyers want set a price that's just right. That's why vegetables get cheaper late at night at a weekly market (few buyers left, and they'll spoil by tomorrow), and why woollens go on sale at the end of winter.