Price is the consideration one pays or agrees to pay for the purchase of a commodity, whether it is a bulk, wholesale purchase or a retail purchase. Price may either be in cash or in any other kind. But it must be according to the terms of agreement between the buyer and the seller. It is very important for any buyer to do price comparison before buying any product.
There is no hard and fast rule as to whether a particular commodity will fetch the same price in different markets. It is even possible that the commodity is demanded for different prices in two outlets in the same market.
Price discrimination exists when sales of the same goods or services are charged at different prices from a single dealer. An example of price discrimination is an airfare where a ticket for the economy seat would not be purchased for the same price as the customer would pay for the ticket for first class seat. The price difference for both the seats are meant for the same plane and the same destination. That is why .price comparison is so important.
This price variation might be due to a number of factors like consumer unawareness, possible quality difference in the items of the product, marginal utility, and most importantly the demand of a product prevailing in different areas. Price relates to demand in a manner that when demand increases this increases the price of the product. Some countries have very strick laws and they do price comparison of basic products on regular basis.
Before going for a retail purchase, or finalizing a deal with a seller, the buyer should make price comparison by visiting two or more outlets or shops selling the same product. Based on this price comparison he should make a prudent decision that whether he should or should not be buying the product from the same dealer.
If the price comparison shows variation in the price patterns of a product due to quality in such a way that if gone for the reasonable price would result in a defective quality where higher quality would cause a huge sum, the buyer should look for an alternative. If a substitute can fulfill the need of the buyer, there is no need to get into trouble of quality and price comparison.
When marginal utility is involved the buyer does not bother to make price comparison. Rather it would be more appropriate to say that he is not in a position to make price comparison. The need for the product is so high that variation in the price holds no or very little significance.
Also, the price comparison should be made keeping in mind that the product to be compared in terms of price has the same quality, same brand, being sold in the same geographical region as well because the distance of the area of sale from the area of manufacture or production directly impacts on the price of the product due to additional transportation costs.
In short, the price comparison is done by a rational buyer through visiting different sale outlets, discussions and consulting those who have knowledge about the prevailing prices or have purchased the same product.
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