In a free market, do bad products and services (always) fail, while good ones (always) succeed?

What about when the demand for a product is completely inelastic. Meaning that no matter how bad your product or service is or how much you charge, demand will still be very high?

An example of perfectly inelastic demand would be a life saving drug that people will pay any price to obtain. Even if the price of the drug were to increase dramatically, the quantity demanded would remain the same.

In a free market, do bad products and services (always) fail, while good ones (always) succeed?

Update:

If people are willing to pay any price, could this kind of product deplete the purchasing power of the population, thus causing the entire economy to have too many dollars spent in the health care sector?

11 Answers

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  • 1 decade ago
    Favorite Answer

    In your example of a life saving drug, the quantity demanded would still be affected by the ability of the patient to pay. Supply and demand would still control the price of the drug. If the drug is offered at a price that very few are able to pay, the drug company will have an incentive to make more money by selling more product at a lower cost. That cost will still be higher than some are able to pay, but low enough that more people can afford it. Even if you are willing to pay any price for something, you are limited by the resources available to you to pay.

    Whether a good or service is bad can be a personal opinion. You may like cigarettes and I may not. A successful good or service will sell because a large number of people are willing to pay for it. So cigarettes which it could be argued are bad still are a profitable item. If by bad you mean a good or service that would not sell and be popular with the public, then no. In a free market only those goods which are popular enough and sold at an equilibrium price will sell and succeed.

  • 1 decade ago

    Of course not. Good products can fail due to bad management, bad advertising, the company just running out of money. There are a hundred ways to fail in business, and making a bad product is only one of them.

    Even in an industry like tech, which places a high value on innovation, it isn't so much being first as coming along at the right time with all the factors in place which leads to success. For instance the first company to produce a working LAN (Datapoint), a portable PC (Osborne), a web browser (Mosaic), and an internet portal (go.com) were all failures, although all of these products were way beyond anything that existed when they were introduced, and in some cases, better than the successor products as well. Other companies followed them and made fortunes in these industries, but the trailblazers are generally long gone.

  • Anonymous
    1 decade ago

    The law of supply and demand: When demand is high, manufacturers will usually decrease supply and they will typically set a "high" price for that product (or service). When demand is low, supply may or may not increase, but the price will almost always decrease.

    Your question seems to imply that a life saving drug that people will pay any price for in order to obtain is a "bad" product. Wouldn't it be a "good" product if it could save your life? And if it in fact can save your life, then isn't worth a lot of money?

  • Most of the time they fail if they have an inferior product or succeed if they have a quality product. If a product becomes inelastic that's where innovation and competition comes in. Someone finds a cheaper, more efficient way to produce a product or comes up with completely new product and charges a lower price. This creates an elasticity in the market.

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  • 1 decade ago

    I think it depends on what you consider to be a failure. The people that market products that seem to be destined for failure right out of the gate, typically ones that people make fun of the most, are apparently successful. Metaphorically, they burn hot and fast, and they die young, but that's a kind of business strategy that some sleeze ball snake-oil salesmen THRIVE on.

    Examples:

    - Pet Rock

    - Weight loss pills

    - Hair growth pills

    - Ab Energizer

    - Thigh Master

    - Sham Wow

  • lolno

    In a free market, the products with the best advertising always win.

    That is why capitalism is always promoting monopolies instead of competition. The companies with the most money to spend on advertising usually win.

  • Anonymous
    1 decade ago

    Your avatar looks like Howard Stern.

  • Anonymous
    1 decade ago

    Good Heavens NO!

    Free Markets are very inefficient that way.

  • 1 decade ago

    Austrian?

  • ?
    Lv 5
    1 decade ago

    Usually, yes, because the bad products won't sell and the companies will go under.

    This stimulates innovation which creates money, which creates jobs, which allow people to go back out and spend that money.

    Source(s): Pipe, are you a moron or just a jackass? There are and have been laws against monopolies for DECADES.
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