It's funny that we actually apply so many theories (whether scientific, philosophical, or psychological, etc.) in our real life without even being aware of it. I recently came across such a concept in Economics. I never studied Economics prior to my PGDM classes, but I was delighted to find out a few concepts that I have applied so many times in my life, especially when it comes to shopping. Whether it is in Kolkata (Esplanade - New Market) or it is in Bangalore (M.G. Road), the notion of shopping is ingrained in me!
And, when it comes to Ladies, who does not want to get a pair of nice sandals or beautiful accessories every time you have a party but, at the least price possible. Now even if my budget for shopping is Rs. 2000, I would be still inclined to buy things that somehow amount to less than Rs. 2000. We would want to save even in a self-approved budget of shopping. It is actually a natural tendency to feel so. We want to have it all and at the same time, spend the least!
The "Economics" Encounter at M.G. Road!
Good Bargaining Skills. That is what you would say!Imagine!
I need a beautiful saree for a college fest and my budget is Rs. 2000. So I go to a nice saree boutique, VijayaLakshmi Silks & Sarees in M.G. Road, Bangalore. After struggling with several choices, I finally liked a Saree, which costs around Rs. 1800. Now please understand the psychology of shopping here! Although I can spend Rs. 2000, and even though the saree costs Rs. 200 less than my budget, I am still inclined to lessen it further. So I quote the salesperson - Rs. 1500 as the cost I am willing to pay for the saree. Consequently, the salesperson and I got into some negotiation and we finally agreed to settle at Rs. 1600. I returned to my college with a big smile on my face and a fulfilling thought to have saved Rs. 400 of my budget.
But, is it really?
This is a common phenomenon that happens every time while we shop! And interestingly, this is an application of Economics in our daily life, namely, Consumer Surplus!
Consumer Surplus is basically the difference between the total amount that consumers are willing and able to pay for a good or service and the total amount that they actually pay.
 |
| Imgflip |
But, what we conveniently miss here is that a seller would not sell his product for a loss (in a general scenario). So, if the seller is agreeing to sell the Saree for Rs. 1600 instead of its quoted price (Rs. 1800) that must mean the Seller is gaining profits in the trade. This concept is formally called as Producer Surplus in applications of economics.
Producer surplus is defined as the difference between the amount in which the producer is willing to sell/supply the goods and the actual amount received by him when he makes the trade.
So, in my case, say the Producer was willing to sell the product at Rs. 1400 initially but then he realized that consumers in the market are willing to purchase it for Rs. 1800. So he quotes his Sarees for Rs. 1800. Now, even after bargaining, he received Rs. 1600 from me, which is still more than what he was willing to sell it for. Hence his Producer surplus is Rs. (1600-1400) i.e. Rs 200.
So next time you go shopping and you convince the seller to give you a product for a lesser price than the quoted price, don't be too happy considering it an advantageous purchase!
Credits:
https://economictimes.indiatimes.com
No comments:
Post a Comment