Labor helps to produce a product offering. Labor costs can change the price of a product. Currently, it takes Will Bury one hour to digitize 500 pages. Will include Two options open to: paying $10 per hour for a high school graduate or paying $2 per hour for an overseas worker. If Will decides to incur labor costs, consumer spending for his product may change. The total price per product will increase and Will’s revenue per product will decrease.
PRICE CHANGE DUE TO SUBSTITUTE PRODUCTS
Substitute products are items that are comparable to a product offering. The industry currently offers a 500-page book on CD, which sells for $20 in the market. Will Bury must stay current on marketing research and stay current on other potential competitors who may offer substitute products. If a competitor offers a high quality cheaper substitute, consumer spending for Will’s product may change. These substitute products can create the need for Will Bury to change the price of his product. Pricing his product too high, may decrease his revenue.
PRICE CHANGE DUE TO FEES
Resources are items that are needed to produce a product. Will Bury have to have the legal right to digitize copyrighted books. If Will decides to digitize copyrighted books, he incurs a $5 fee. Because of the $5 fee, the total price per copyrighted products increases. Consumer spending for Will’s product may change.
ELASTICITY OF DEMAND
One type of elasticity of demand is to calculate the ratio of the percentage change in quantity demanded of a product to the percentage change in its price. This is known as the price elasticity of Demand (Ed = the percentage change in quantity demanded of a product over the percentage change in price) (McConne ...