Why prices increase when demand is high?

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Question: 

I want to ask a question that why the producer of a good increases the price when the demand is high, isn't it unfair, he could have sell his good on same prices on first come first serve basis ,while increasing his goods production and selling on same price rather to increase it. I shall be thankful if u answer this. I personally consider it unethical.

Answer: 

Economists start from the presumption that producers want to maximize their profits, and are not running a business to promote social welfare or social justice. If a producer can sell 1 unit of a good to Mr. A for $10, he would always prefer to do that than to sell the same unit to Mr. B for $8, even if, it was somehow known that Mr. B would be made happier by the purchase than Mr. A. In your example, keeping prices fixed and selling on a first-come-first-served basis is fine except it keeps some people (too far back in line) from getting the good even if they are willing to pay a higher price. That is not "fair" as well. 

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Last updated on June 20, 2022