Economics
Price-building mechanism is one of the basic economic principles. Price establishing is also a very interesting topic to explore, as we pay for some sort product every day, but not always realize the true cost of the item we are buying. For any product, there is a basic rule how the price is being determined after several vital factors are taken into consideration. The price of the product is made up from a number of characteristics: the component costs, the labor costs (what it takes to assemble the product), marketing costs, shipping costs. Marketing costs include raising awareness of the product and advertising campaigns combined with package design. Shipping includes all the transportation of the product from the place it is manufactured, to the company storages and to the retailers through a complex distribution chain. Taxes are not always included as regular expenses, as some companies pay taxes based on the volume of sales, and other based on the revenue gained.
The products, manufactured by large multinational corporations, mostly demonstrate the pricing mechanism the best way. As a reference product and a reference company in this case I decided to pick the Apple Inc. and its fascinating line of products, starting with “iPod Shuffle” to the “Nano”, “Classic”, “Touch” models and one of the most famous and notorious products – “iPhone”. Due to the specifics of the company, Apple’s products can not be viewed separately. Any of the devices, listed above is not just a high-tech item, but a certain lifestyle. Moreover, all these products are manufactured with relatively similar technologies, on basically the same plants and share management, shipping and marketing expenses, as iPods are rarely advertised alone, th ...