Price and Market Research

Let's discuss how people make money.

Basically, money is a representation of value that can be used by people for exchange of goods and services. So if you want people to give their money to you, you have to give them goods or services. Now different people are willing to pay different amounts of money for the same good or service. So you should put a price that maximizes the sum of money people will pay for your product.

Assume you've spent $5 for making a product and you have made 20 of those ($100 in total spent).

Now you want to sell that product. There is one guy who's willing to pay $20 for one of your products. And she only wants one. Then there are 15 people that want your product for $10. And another 10 people are there willing to pay $5 for each of your products. And all these people just want one. 

You have to put a fixed price. What would be the price. $10 of course.

Your profit would be 16*5=$80. Which is more than $15 if the price was $20 and $0 if it was 5.

Market research is done prior to sale and sometimes prior to production to have an estimate of if there'll be a profit and how much will it be.