The customer isn't always right... You get what you pay for

We hear this phrase tossed around a lot in every industry. Unfortunately for the customer this is very much a falicy. It is true and correct in a few industries, where the phrase actually originates from, yet beyond that it loses steam. In a service industry, like restuarants or hotels, this is very much the case as only the customer and the customer alone can decide what is satisfactory for their own taste buds and/or comfort. In any other case the customer is lacking far too much information to be able to comment on what is proper or correct. A lack of information is also why the wholesaler will always give the retailer a "suggested retail price" or "minimum purchasing price". But I am getting a head of myself. The right to refuse service is one that every provider, no matter the industry, is entitled to invoke. In no way is any provider of any product or service obligated to give, sell, or provide what they proffer. They can, in fact, decide to do nothing with any given customer at any given time within the transaction for any given reason. Once the transaction is completed, however, they are very much obligated to fulfill their end of the bargain. This notion that the customer is in control is quite damaging and can set an entire industry *ahem* on it's head. There are many ways we can go from here so let us start with a little basic economics and pricing guidelines. With better understanding of why products are given their tickets and how supply and demand affect pricing, we might have much smoother transactions, on the way from functioning like a drug dealer to sound legit business. You cannot insist on legalization while continuing to function like drug dealers. 

Supply and demand have great impact on the market. Price is derived by the interaction of supply and demand. The resultant market price is dependent on both of theses fundamental components of a market. A market price is NOT a fair price to all participants in the marketplace. It does not guarantee total satisfaction on the part of both buyer and seller or all buyers and all sellers. This will depend on their individual competitive positions within the market. Quality is a huge part of pricing decisions within the competitive market. When dealing with agriculture type products the cost of production, maintaining, and distribution are important factors of pricing. Seasonal products will vary in quality which will also affect market price. More than likely seasons will also affect production costs, which will include any unforeseen treatments or issues that may arise. One crop might be higher in quality but less expensive due to maintanence or production costs being less or lower than the higher quality crop. Take winter melons, they tend to be more expensive even if quality is lower due to manufacturing and being distributed from farther away. Since it costs more to produce and distribute from a far away country it will cost us more to purchase the melon than if it were summertime and we could get them more locally, the quality will probably be much better in the summer as well. Supply is also a factor here. If there are an abundance of melons that season the cost of them may dip down a bit if not too many people demand them.

Let's dig a little further, when either supply or demand changes, the equilibrium price will change. Changes in supply and demand can be short run or long run in nature. If demand goes up, for example, and supply is unchanged then it leads to a higher equilibrium price and lower quantity. If supply goes up and demand is unchanged then it is safe to say it leads to a lower price and higher quantity. There are four basic laws of supply and demand to bear in mind:

1. If demand increases and supply remains unchanged then it leads to higher prices and possibly lower quantity.

2. If demand decreases and supply remains unchanged then it leads to lower prices and lower quantity.

3. If supply increases and demand remains unchanged then it leads to lower prices and higher quantity.

4. If supply decreases and demand remains unchanged then it leads to higher prices and lower quantity.

Economics assumes the consumer is a rational decision maker and has perfect information.

This brings us to pricing. What are the factors to consider and how do they affect how products are priced? As I am sure you have deduced on your own, pricing is the process of determining what a company will receive in exchange for it's products. There are factors to consider when pricing and these factors will come into play in the final price. As quality and different ways to produce the "same" product will determine the end sale price that would explain why one company's product may be more expensive than their competitors. Pricing factors are manufacturing costs, market place, competition, market condition, brand, and quality of product. Pricing is the manual, or automated, process of applying prices to purchase and sales orders, based on factors such as; fixed amount, quantity break, promotion or sales campaign, specific vendor quote, price prevailing on entry, shipment or invoice date, combination of multiple orders or lines, and many others. The automated method is fast improving across an aray of industries and will surely become something of great use as a tool, if not a standard, once it can compete across the board. Manual is our most all encompassing reliable method for many industries at this time. How flexible can we be in pricing? The more competitive the industry the less flexibility we have. The price floor is determined by production factors like costs, economies of scale, marginal costs, and degree of operating leverage. The price ceiling is determined by demand factors like price elasticity and price points. What are non monetary costs of purchasing the products? These are also things that will tend to influence end sale prices. They include time taken to travel, preparation time, time spent in store (with client), in term clarification and discussion. Price is influenced by the type of distribution channel used, the type of promotion used, and the quality of the product. Price will usually need to be relatively high if manufacturing is expensive and distribution is exclusive. A low cost price can be a viable substitute for product quality. The price/quality relationship refers to the perception by most consumers that a relatively high price is a sign of good quality. The belief in this relationship is most important with complex products that are hard to test accurately and experiential products that cannot be tested until used, as is most services. The greater the uncertainty surrounding a product, the more consumers depend on price/quality hypothesis and the greater premium they are prepared to pay. 

Pricing is also a key variable in microeconomic price allocation theory. Microeconomics is the study of the smaller units of the whole economy. The study of microeconomics is based on the terms of supply and demand. The study of economics at the level of individual consumers, groups of consumers, or firms. The encyclopedia of economics gives the realizations of multiple definitions of microeconomics. This definition is the most all encompassing and can accurately define microeconomics, it reads as follows; "the general concern of microeconomics is the efficient allocation of scarce resources between alternative uses but more specifically it involves the determination of price through the optimizing behaviors of economic agents with consumers maximizing utility." The strength of microeconomics comes from the simplicity of it's underlying structure and it's close touch with the real, outside, world. Supply and demand is the core of microeconomics and how they interact in a various markets. 

The field of industrial organization with the different mechanisms by which goods and services are sold, for examples sake these would be cartels, monopolies, and different types of competitive behavior. Agriculture economics deals with the demand of farmland, farm labor, and other factors of production involved in and around agriculture. The great unifying principles of microeconomics are, ever, and always, supply and demand. 

If all parties involved, suppliers and consumers, have a good understanding of these simple and straightforward underpinnings the success of coming to a fair price for all would logically be higher. Again, this is assuming all consumers are rational decision makers with perfect information. What we see, clearly, is suppliers being unaware of their actual costs and other major factors as well as consumers being unaware of pricing factors.