Distinguish between price consumption curve and income consumption curve ?
Answers
Explanation:
When you price products for your small business, you can fall into the trap of ignoring other factors that affect consumer demand besides price. Consumers have budgets and choices about what products to spend those budgets on. When pricing a single product to create the highest demand, look at what other products customers may be considering. This requires you to use both a demand curve and price consumption curve.
Explanation:
Demand Curve
You should use the demand curve when considering how to price a single product. Generally, the lower the price, the higher the demand will be. The demand curve can have a steep slope or a gentle slope, depending on the product. This means that for some items, a slight change in price can greatly affect the demand for it, while other products experience a much steadier demand despite price changes. You have to experiment with the pricing on individual products to determine how price will affect demand.
Price Consumption Curve
The Price Consumption Curve deals with two equally attractive products a consumer may be considering. The curve also takes into account the customer’s budget. The two products can be entirely different from each other, such as gas and food, and you assume the consumer wants or needs both of them. At the point where the price for the two products together is in the customer’s budget and she can have both of them, you find equilibrium. If you raise your price, the consumer may cut back on purchases of the other product for awhile, but a sustained price increase on your part can cause the buyer to forgo your product because of the perceived need for the other one over yours.