r we responsible for price rise?

S

shaan07swarup

New member
Price of a product depends on the market forces of demand and supply as we always read in our so called Business Schools.But actually have we ever thought, "what creates the demand and induces supply in the market".I know most of us even don't care about that but still then the answer is US {we the people}.How?Let me explain:

Now a days, as we all must have seen, there has been a tremendous increase in the prices of various products,may be a vegetable or an i phone. It doesn't matter whether we are buying a luxurious product or a necessity but we can see that the necessary items have become as costly as the luxurious items.Do we know the fact why? It is because today the people of our country have more purchasing power and are willing to pay as much as money,a seller wants for a desired good.

My example will give a more clear picture:
Let us take the example of an i phone.
An i phone costs 150$ to 200$ in U.S( Rs. 8000-10000)
The i phone is a product from Apple,U.S.A which sells like pan cakes all over the world and as Apple is a business entity,it sells i phones at certain margin of profit in the U.S.The manufacturing cost of each i phone is 80$ to 120$(Rs 4000-6000) as it is assembled in China.So Apple is already earning a profit of 80$ to 120$ in U.S.
In India,the cost of and I phone ranges from Rs. 27000-36000{540$-720$}.So apple makes a straight profit of 600$ on each i phone sold.Even the prices in U.S got lowered but still then the prices in India remained the same, it is because the people here are buying them like pastries even if they are high priced.When the people are ready to buy the product at the high price then the prices tend to increase after a new update is introduced and the prices never come down.

As we tend to increase the demand ourselves,the sellers tend to increase the price.

This example can be given in case of multiplexes also. Every multiplex gives us a better service, ambiance, comfortable seating etc. than other local cinemas but the pricing system is really poor. The prices of the tickets increase and decrease for each movie as per the wishes of the multiplexes and the prices seems to increase every time whenever a new movie is introduced. I really support their decision to make money as quick as possible before the movie's demand drops. But there should be a control over the prices of tickets.The prices remain high and tends to increase because we are ready to pay even it becomes Rs. 1000 for a premiere. People want to watch the movies any way even if they are priced 4 times higher than the normal ticket prices. When the multiplexes observe that the shows go house full then they increase the ticket prices to earn huge profits even if they were already high priced.


We do not understand the price mechanism and pay any price for our desired product or service as we have the purchase power but it has a negative impact on other people.The prices tend to increase and most of the people even are not able to afford the product or the service.We create demand and we hike the price.So it is in our hands to control the price rise.The products which are high priced should be given less importance so that the demand created is less and the prices will come down.Its not about our recognition,reputation and status that should be thought of but the future of the country and equitable pricing system that should be looked upon.
 
Simply put, it goes back to the age old Price elasticity of demand.

Determinants

The overriding factor in determining PED is the willingness and ability of consumers after a price change to postpone immediate consumption decisions concerning the good and to search for substitutes ("wait and look"). A number of factors can thus affect the elasticity of a good
Substitute goods: the more and closer the substitutes available, the higher the elasticity is likely to be, as people can easily switch from one good to another if an even minor price change is made
Percentage of income: The higher the percentage of the consumer's income that the product's price represents, the higher the elasticity, as people will pay more attention when purchasing the good because of its cost
Necessity: The more necessary a good is, the lower the elasticity, as people will attempt to buy it no matter the price, such as the case of insulin for those that need it.
Duration: For most goods, the longer a price change holds, the higher the elasticity, as more and more people will stop demanding the good. Additional time tends to allow for easier substitution as consumers have more time and inclination to search for substitutes. When fuel prices increase suddenly, for instance, consumers still fill up their empty tanks, but when prices remain high over several years more consumers invest in fuel economy and lower their overall consumption. This does not, however, hold for consumer durables, such as cars themselves, where there becomes, in time, the necessity to switch models and so one expects a increased inelasticity.
Breadth of definition: The broader the definition, the lower the elasticity. For example, Company X's fried dumplings will have a relatively high elasticity, whereas food in general will have an extremely low elasticity.
Brand loyalty: An attachment to a certain brand - either out of tradition or because of proprietary barriers - can override sensitivity to price changes, resulting in more inelastic demand.
Who pays: where the purchaser does not directly pay for the good they consume, such as with corporate expenses, there is likely to be more inelastic demand.

More at http://en.wikipedia.org/wiki/Price_elasticity_of_demand
 
we may be a part which drives the price uphill,,because we r on the side called demand,we generate demand,but what makes us to demand more is a kind of different thing....
 
anyways, itz the general market tendency that when demand increases, price increases for necessary goods and vice versa
 
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