i ran a back to school special and worked every day this week, but today. And that was only due to a cancellation. Bite Your pride and run a hellofa special and they will come. No offense intended, as i had to think twice about going as low as i did, and what the repercussions may be when i decide to go back to my normal rates. But tough times call for tough measures. Originally Posted by subcillaEconomics 101:
Supply and Demand: If Supply is constant and demand drops, price must drop for demand to return to normal. If Supply is constant and demand goes up, price will rise until demand is satisfied.
Two terms you have to become familiar with;
Opportunity Cost : What must be given up (the next best alternative) as a result of the decision based upon scarcity of resources.
Relative Price: The price of one choice in relation to the price of what would be given up.
If Provider A charges X and Provider B charges 2X and a Hobbyist has 2X in his pocket, his choices are to see Provider A twice or Provider B once due to the scarcity of resources (discretionary spending). One provider is the opportunity cost of choosing the other provider. The Realtive Price of a session with Provider B is Two sessions with Provider A or 2:1 or double.
In good economic times consumers will buy more expensive items that they consider a better value. During difficult economic times consumers will buy the lower priced product since it represents a better value to them. If the expensive item is suddenly the same price as the lesser one, then the Relative Cost is 1 (no price difference ... no brainer) , and the consumer will opt for the previously more expensive choice .
When the economy improves and Provider B raises her rates back to the previous higher Price, the consumer will still opt to buy the more expensive item.
BTW.. SubCilla... you get an "A" in economics...
