purchase price

Examples of purchase price in the following topics:

• Impact of Price on Consumer Choices

  • This correlation between the price of goods and the willingness to make purchases is represented clearly by the generation of a demand curve (with price as the y-axis and quantity as the x-axis).
  • The construction of demand, which shows exactly how much of a good consumers will purchase at a given price, is defining of consumer choice theory.
  • As the demand curve implies, price is often the central driving force behind a decision to purchase a given product or service.
  • Price elasticity is essentially a measurement of how much any deviations in price will drive the overall quantity purchased up or down, underlining to what extent consumer purchasing decisions will be dictated by pricing.
  • A highly elastic good will see consumers much less likely to purchase when prices are high and much more likely to purchase when prices are low, while a good with low elasticity will see consumers purchasing the same quantity regardless of small price changes.

• Market Demand

  • Market demand is the summation of the individual quantities that consumers are willing to purchase at a given price.
  • The demand schedule represents the amount of some good that a buyer is willing and able to purchase at various prices.
  • The relationship between price and quantity demanded reflected in this schedule assumes the following factors remain constant:
  • A market demand schedule for a product indicates that there is an inverse relationship between price and quantity demanded.
  • The market demand is the summation of the individual quantities that consumers are willing to purchase at a given price.

• Impacts of Price Changes on Consumer Surplus

  • This means that consumers will be able to purchase the product at a lower price than what would normally be available to them.
  • For consumers to achieve a surplus they have to be able to purchase the product, which means that producers have to make enough to be purchased at a price.
  • So while more consumers will want to purchase the product because of its low price, they will not be able to.
  • When a price floor is set above the equilibrium price, consumers will have to purchase the product at a higher price.
  • Therefore, fewer consumers will purchase the product because some will decide that the utility they get from the good is not worth the price.

• The Demand Curve and Consumer Surplus

  • Consumer surplus is the difference between the maximum price a consumer is willing to pay and the actual price they do pay.
  • If a consumer would be willing to pay more than the current asking price, then they are getting more benefit from the purchased product than they spent to buy it.
  • This area represent the amount of goods consumers would have been willing to purchase at a price higher than the pareto optimal price.
  • If a person has no use for a good, there is no consumer's surplus for that person in purchasing the good no matter the price.
  • Consumer surplus, as shown highlighted in red, represents the benefit consumers get for purchasing goods at a price lower than the maximum they are willing to pay.

• Status-Quo Pricing of Existing Products

  • In their book The Strategy and Tactics of Pricing, Thomas Nagle and Reed Holden outline nine "laws"—factors they say influence how a consumer perceives a given price, and how price-sensitive they may be with respect to different purchase decisions.
  • End-Benefit Effect: This effect refers to the relationship of a given purchase to a larger overall benefit, and is divided into two parts.
  • Shared-cost Effect: The smaller the portion of the purchase price buyers must pay for themselves, the less price sensitive they will be.
  • Fairness Effect: Buyers are more sensitive to the price of a product when the price is outside the range they perceive as "fair" or "reasonable" given the purchase context.
  • Status-quo pricing, also known as competition pricing, involves maintaining existing prices (status quo) or basing prices on the prices of competitor firms .

• Terms Used to Describe Price

  • We've been using the word "price" a lot.
  • The price of an item is also called the price point, especially where it refers to stores that set a limited number of price points.
  • Other stores (such as dollar stores, pound stores, euro stores, 100-yen stores, and so forth) only have a single price point ($1, £1, 1€, ¥100), though in some cases this price may purchase more than one of some very small items.
  • Price is relatively less than the cost price.
  • It is on this basis that customers make decisions about the purchase of a product.

• High/Low Pricing

  • High-low pricing is a strategy where most goods offered are priced higher than competitors, but lower prices are offered on other key items.
  • High-low pricing is a method of pricing for an organization where the goods or services offered by the organization are regularly priced higher than competitors.
  • However, through promotions, advertisements, and or coupons, lower prices are offered on other key items consumers would want to purchase.
  • High-low pricing is a type of pricing strategy adopted by companies, usually small and medium sized retail firms.
  • The basic type of customers for the firms adopting high-low price will not have a clear idea about what a product's price would typically be or have a strong belief that "discount sales = low price. " Customers for firms adopting this type of strategy also have strong preference in purchasing the products sold in this type or by this certain firm.

• Price Floor Impact on Market Outcome

  • A price floor will only impact the market if it is greater than the free-market equilibrium price.
  • Consumer surplus is the monetary gain obtained by consumers because they are able to purchase a product for a price that is less than the highest that they are willing pay.
  • An effective price floor will raise the price of a good, which means that the the consumer surplus will decrease.
  • While the effective price floor will also increase the price for producers, any benefit gained from that will be minimized by decreased sales caused by decreased demand from consumers due to the increase in price.
  • The other option is for the government that set the price floor to purchase the excess supply and store it on its own.

• Psychological Pricing

  • Inferring quality from price is a common example of the psychological aspect of price.
  • Another manifestation of the psychological aspects of pricing is the use of odd prices.
  • We call prices that end in such digits as 5, 7, 8, and 9 "odd prices. " Examples of odd prices include: $2.95, $15.98, or $299.99 .
  • Psychological pricing is one cause of price points.
  • When items are listed in a way that is segregated into price bands (such as an online real estate search), the price ending is used to keep an item in a lower band, to be seen by more potential purchasers.

• Analysis of Price Discrimination

  • Second degree price discrimination: the price of a good or service varies according to the quantity demanded.
  • Prices vary according to seat selection, time of day, day of the week, time of year, and how close a purchase is made to the date of travel.
  • By using price discrimination, the seller makes more revenue, even off of the price sensitive consumers.
  • Premium pricing: uses price discrimination to price products higher than the marginal cost of production.
  • Gender based prices: uses price discrimination based on gender.