It is very intriguing to observe the play of pricing with a product and a service. Though this is not a very complex economic theory, my habit of observing economics at work in real life brings unique examples.
The other day I was reading on how Maruti Suzuki has brought down the manufacturing costs thanks to growing demand of their goods. The more people are buying the cars, the lesser is the cost of production. With more demand the production line costs which include costs of parts, assembling automation, testing, personnel costs everything has come down. They are able to pass of this benefit. It is called "Economics of scale".
The same day I took a Uber cab. Being a residential area the demand for cabs in my area is high. As the demand is high, Uber increased the price of cab to 1.7. The "Surge pricing" is just a function of demand. So in case of services, as demand increases the price increases. This is true for artists, musicians and every other "performer" or "doer".
The demand price function thus applies inversely to product or service.
The other day I was reading on how Maruti Suzuki has brought down the manufacturing costs thanks to growing demand of their goods. The more people are buying the cars, the lesser is the cost of production. With more demand the production line costs which include costs of parts, assembling automation, testing, personnel costs everything has come down. They are able to pass of this benefit. It is called "Economics of scale".
The same day I took a Uber cab. Being a residential area the demand for cabs in my area is high. As the demand is high, Uber increased the price of cab to 1.7. The "Surge pricing" is just a function of demand. So in case of services, as demand increases the price increases. This is true for artists, musicians and every other "performer" or "doer".
The demand price function thus applies inversely to product or service.
