Similar-Value Economics For Pricing
Economics. The human nature provides knowns that along side facts allow us to define and describe the economy. The economy is the supply and demand of commodities and factors of production. Here we cover the demand side of the micro-economy. Demanded commodities have positive abstracts, that the subject interprets for satisfaction. This abstract is expressed in a qualitative description (described benefit of the commodity), and expressed in a monetary description.
Here, we interpret that some knowns and some facts, mean similar values, higher values and similar profits are shown. I then use these to recommend a price, I use the soft drinks market as an example. I then use “higher valued comparable goods” to find similar profis - thus value and total consumer profits in Milk example.
First, We describe what human nature means for demand decisions. Economic success is translated as a money stock. Good money stock means high belief in humanity, bad money stock means low belief in humanity.
There is commodity stock (wealth), land and capital equipment stock, and money stock (liquidity). Money is defined as an instrument of demand. Money supply is transfer of money from money stock held by conditioning agents to other. Money is supplied to markets. This money supply is determined by monetary conditions.
Although there are other determinants, money stock is a good indicator - as when humanity is high then individual consumes effect. Where money stock is bad then humanity is low and individual realises rational profit. We either choose between similar values (effects) or between similar profits. In short, with a basket of profitable goods we choose the highest value as we have plenty of money, or we choose the most profitable as we have little. We are either interpretive of resources for value or rational with resources for profit.
There is false awareness, including sorted status culture. This is consuming for effect through economisation.
LAW - stock of money means success and high humanity
LAW - high humanity means condition for effect
LAW - Always rational on financial markets and with taxation as money has same effect
LAW - false awareness or not
INTERPRETATION - Money stock means condition for effect ( except finance and tax ), low stock means rational, otherwise in false awareness (economise for effective goods - "Sorted status").
Where we have plenty of money then we consume an effect from a choice of affordable goods, when not then cost minimising and seeking discounts and bargains. Obviously a range of goods is affordable, or only able to rationally consider a profit.
FACT - Demand and price of consumer durables rise
FACT - Milk demand and price unchanged
FACT - Interest and currency rates unchanged
INTERPRETATION - Money stock increase (possible humanity appreciation) - or sorted status culture
Now let us show opportunity cost as a factor in the demand decision, thus comparisons are made. Diminishing marginal benefit is avoided, thus demand switches between two. Similar opportunity costs in each other, similar values. These similar values are expressed as a monetary measurement, description of the value being expressed as a quantity.
Similar values (example)
FACT - Pepsi £1, Tango £1.40
FACT - Demand is 50 for both, or 60 for both or 80 for both when Tango £1.40.
FACT - Little demand for Tango £1.60, higher demand for Pepsi
FACT - All other prices stay the same
LAW - Diminishing marginal benefit
LAW - Will is conditioner
INTERPRETATION- At this price similar demand to each other but changing overall. Demand is higher for Pepsi and none for Tango when Tango £1.60. Opportunity cost of Tango in Pepsi being too irrational is only explanation. As will conditioner, then avoiding this cost means a choice was made; a comparison was made. Will compares effects of affordable products, thus will is interpretive (no demand for Tango at higher price means value not consumer profit compared. Effective.
From these graphs you can see opportunity cost is a factor in decision making, and demand equates at £1.40 per unit of Tango.
With consumption benefits diminish, meaning opportunity cost effectively increases.
Demand switches equally between the two. Demand switches after one unit is consumed. More than one unit being forgone is too high an opportunity cost - that cost being the value forgone (£1.40). More than £1.40s worth of Tango is to high a cost to the value of pepsi. Value is maximum of £1.40 or more would be consumed.
SO, Tango has a value of £1.40. One is willing to forgo £1.40s worth of Tango when choosing pepsi over it - but no more. Similar values of £1.40.
As all other prices stay the same, theres been no change in other determinants of demand.
LAW - Opportunity cost is avoided as will is a conditioner and explains demand
FACT - Demand equates when priced at £1.40, comparisons made
LAW - Diminishing benefit
INTERPRETATION - Demand switches equally between the two, similar opportunity costs in terms of each other, similar values then; first unit of Pepsi £1.40 as first unit of Tango £1.40.
Obviously a higher value will be wanted, our wants are limitless, but we compare whats affordable. We either compare whats affordable for value or whats affordable for profit as will is conditioner. . When discounted, with diminishing benefits the similar values are eventually preferred and demand for the former high value (now similar value) eases off.
We drop the price of dr pepper from £1.60 and notice increases in demand (elastic). However, when dropping the price from £1.40 demand only increases slightly (inelastic).
FACT - Demand increases when price of dr pepper falls from £1.60 to £1.40
FACT - Demand increases slightly below £1.40
FACT - Increase in demand for pepsi when dr pepper £1.40 or below
INTERPRETATION - Opportunity cost of dr pepper in pepsi not a factor as demand increases with price reduction (savings spent on more dr pepper). However, when priced below £1.40, there is as theres diminishing increase in demand. Pepsi worth £1.40 as this is when its preffered, dr pepper £1.60 (higher value).
Dr Pepper should be priced at £1.40 to optimize profit. Where we reduce the price of dr pepper below £1.40, savings is spent on Pepsi, conversely when increasing the price to £1.40 means consumers buy less Pepsi (opportunity cost of Pepsi's consumer profit doesn't matter).
A trend that will reveal a similar value is demand stability when prices are changing. That is in a market where prices are volatile then so demand is volatile, where as similar-value effective goods will have a stable demand.
Similar Profits (example)
In order to price things generally in a shop (Tesco), its best to vary price of milk to note changes in what are then defined as comparable or higher value goods. We also note the elasticity of demand for milk.
We use milk as virtually 100% of the population buy it, so what is preferred is a representative sample. Demand for consumer durables increases most when we decrease the price of milk. milk price is thus a factor in durable demand. When milk price falls consumers get same amount of milk for lower price - spending more on durables not milk. Milk price thus restricts higher demand for durables, there is an opportunity cost of durables in milk. Where you lower the price of durables then milk demand remains unchanged, durable price is not a factor in milk demand. Your willing to forgo milk for durables but not durables for milk. Durables are a higher value to milk.
We drop the price of the higher valued good to equate demand and realise similar profits, to find consumer profit of durables and value of milk.
When we introduced the durable to the market we found the value of first unit; then decrease price of durables until demand equates (considering milk elasticity), consumer profits equate as values differ.
FACT - Demand is one at £15 (higher valued toaster)
FACT - Demand is 6 (for toaster) and 5 (for Milk) when toaster £10 and milk £2
LAW - Will is conditioner
INTERPRETATION - First unit of toasters £15. When £10, demand is 6 for toaster and 5 for milk. Accounting for demand from other stores for the toaster by applying milk’s elasticity of demand to durable demand knowing the value of first unit1. This means true demand equates at five each; meaning comparisons made but values different. Opportunity cost is a factor with diminishing marginal benefit, thus equating demands means similar consumer profits. Other wise there would be profit in a sixth unit, and demand wouldnt equate. Toaster has profit of £5 first unit ( the difference between price (£10) and value of first unit (£15)) and has elasticity of 1 then total profit of £15 over 5 units. Milk has similar profit of £5, now having the same elasticity held, the first unit is £7 with a profit of £5. I realise and construct elasticity at Tesco.
One problem is consumers who never bought toasters at Tesco coming from other shops, giving us false demand numbers. As you have seen the elasticity of milk will be the same as durables when demand equate with the same consumer profit. Applying milk elasticity of demand to durables when first unit £15 means demands equate at 5 each. The demand over and above the elasticity of milk when applied to durables is demand from other stores (1).At the price of £10 true demand equates and theres similar consumer profit.
A better approach will be to reduce the price of milk - informing customers in durable section (an appropriate sign). What will happen is the drop in the price of milk means buying durables for the home. They happen to be “sorting it out”, they notice the discounted milk and buy things they have noticed, that they happen to like.
Thus, when demands equate at different prices and opportunity cost is a factor, they have similar values. When opportunity cost is a factor of one of the goods in the other, one is a higher value. When opportunity cost is a factor, demands equate and ones a higher value, then they have similar consumer profits.
As will is a conditioner, conditioning of similar or higher values means effective, similar profit means rational.
(EFFECTIVE)
DIMINISHING BENEFIT WHEN OPP. COST IS A FACTOR, AND DEMAND EQUATES>SIMILAR VALUE
(EFFECTIVE)
OPP. COST OF ONE IN TERMS OF THE OTHER>HIGHER VALUE
(RATIONAL)
DIMINISHING BENEFIT WHEN OPP. COST IS A FACTOR, AND DEMAND EQUATES>ONE A HIGHER VALUE>SIMILAR CONSUMER PROFIT
Thus, the first and second laws of demand are diminishing marginal benefit and opportunity cost ( as shown in the "humanity" file ). These mean the third law of demand - that is "...where demand equates at different levels, given diminishing benefit and opportunity cost is a factor, then the goods have a similar value or consumer profit..."
DEMAND EQUATES + DIM. BENEFIT + OP. COST > DEMAND SWITCHES > COMPARISONS MADE > SIMILAR VALUE / PROFIT
1st Law - Diminishing marginal benefit to consumer goods ("Humanity Knowns").
2nd Law - Where good x is positive, and good y is freely chosen - given that the decision maker is a conditioner, good y must be positive too ("Humanity Knowns")
3rd Law - Where goods x and y have equating demand at different levels (given the first and second laws) then they are a similar consumer value or have a similar consumer profit
Recommendation - You could use similar profits to price goods.Why not reduce price of new good until demand equates, finding underpriced goods. Dont then increase the price of these goods, and lose trust, but let it inform the purchasing decision for business stocks. For example, We drop the price of toasters from £20 to £15 noting elasticity. A microwave is £100, we drop the price to £60 and notice demand equates with £15 priced toasters (when toaster elasticity is applied to microwave). This means similar consumer profit ( value minus price) of £40. Toasters are worth £55. Purchase and sell Sandwich makers (judged to be similar) for £35 as its consumer profit being bought. Depending on competition.
Also, you could use similar values to price goods. For example, You run the only designer store in a Town, not a city, and Ralph lauren (£100) is always compared, before your eyes with, Burberry (£50). Customers dont know which one to buy and demand roughly equates. Then why not bring in Aquascutum, roughly similar to burberry but charge £100 (no real competition) as its effective value, not profit being bought. However, if we subscribe to the common understanding, then charge £50 for the aquascutum.
Another example, is a customer who compares a Golf GTi to a Peugeot GTi and doesn't know which one to buy. He asks the price of the Golf and is told £20,000. He still compares the two and cant make his mind up. That means the Peugeot GTi is worth £20,000 to this individual. Thus instead of raising the price of the Peugeot, bring in a Citroen (judged to be similar) and charge £20,000.
*We know wants are many, so reasons for demands are many. The decisions are about marginal benefits - as whatever the reason for the first unit, it is satisfied or they wouldnt pay. Satisfaction means satisfaction of whatever reason. For example - It may be argued that theres ony a reason for X amount of goods ( a car part ), but wants are many so theres always reason for more ( Contingency parts ).
1When applying milk elasticity to durable demand - a big or a small difference indicates, among other things, effectiveness of marketing, strength of competition etc ALSO, milk is competitive market so a price reduction of milk in other stores will occur (Only customers in tesco will buy more milk).