Final answer:
In a competitive market, prices are determined by the interaction between supply and demand. Price differences between supply channels can arise from differences in production costs, distribution costs, marketing strategies, target market segments, and level of competition within each channel.
Step-by-step explanation:
In a competitive market, prices are determined by the interaction between supply and demand. Producers offer goods and services for sale at different prices based on the cost of production and the desired profit margin. Consumers, on the other hand, determine their willingness to pay based on their own preferences and budget constraints.
The price of a product can differ between supply channels due to various factors. These factors include differences in production costs, distribution costs, marketing strategies, and target market segments. For example, if a product is sold through a high-end boutique, the price may be higher compared to if it is sold through a discount store.
Price differences between supply channels can also arise from the level of competition within each channel. If a particular supply channel has limited competition, the seller may have more pricing power and can charge a higher price. Conversely, in a highly competitive channel, sellers may need to lower their prices to attract customers.