Why do consumers sometimes take a while to respond to price changes? -Consumers cannot find acceptable substitutes immediately. -Demand sometimes becomes less elastic over time. -Price changes do not affect consumers. -Consumers need time to decide whether the good is a luxury or a necessity.
How do prices changes affect equilibrium?
The equilibrium price is the price at which the quantity demanded equals the quantity supplied. An increase in demand, all other things unchanged, will cause the equilibrium price to rise; quantity supplied will increase. A decrease in demand will cause the equilibrium price to fall; quantity supplied will decrease.
How are customers perceive a price as important as the price itself?
How Customers Perceive a Price Is as Important as the Price Itself. For example, one retailer’s reputation as an upscale discounter, built through its store and product design, has given consumers the perception that it charges a price premium, when in fact its prices run slightly lower than the average in the two cities.
Why do companies want to be perceived as having lower prices?
And most companies—luxury purveyors aside—want to be perceived by consumers as having lower prices, relative to competitors, than they in fact do.
What happens to consumer spending when prices fall?
When prices fall consumers increase their purchases. They buy less when prices rise. However, the response to price changes depends on the type of product.
What happens if a retailer does not raise its prices?
Its pricing strategy does not mesh with its overall proposition to customers, with the result that the retailer does not get the pricing credit it deserves. One option for the retailer would be to raise its prices slightly, since customers have already baked the (incorrectly) perceived premium into their shopping decisions.
