Question

Economics affects nearly everything we do in some way. Someone else has produced most items we consume, or use, in our daily lives, from food to clothes to music to gas for our cars. Chances are, when we purchase these daily items, we don't question the price with the producer. But in the United States, the interactions between the consumers and producers determine quite a lot in terms of business and economics.

Think about the items and services that you and your family buy or consume. What causes you to pay the prices that you do for these goods and services? What determines the price that's on the price tag? What goes into determining, or setting, that price? Consider all the possible elements that could influence the prices you pay.

Answer 1

Prices of goods and services are influenced by price elasticity, consumer income, and other factors such as production costs, competition, government policies, and environmental considerations.

Step-by-step explanation:

When determining the prices of goods and services, several factors come into play. One significant factor is the concept of price elasticity, which measures how responsive consumer demand is to changes in price. For luxury items, demand may increase substantially when a product goes on sale due to their high elasticity. On the other hand, necessities have a lower elasticity, meaning that changes in price have a smaller effect on consumer demand.

Another key factor is the consumer's income, which influences the choices people make since they must allocate their limited income to various goods and services. Prices a consumer is willing to pay are also affected by the production costs, market competition, and the perceived value of the products and services.

Overall, prices are influenced by supply and demand dynamics in the market, consumer preferences, cost of production, government policies, and environmental factors. Each of these contributes to the final price tag consumers see on goods and services.

Answer 2

My family purchases a lot of things every day, most of them we don't even realize we are purchasing them or we take it as something completely ordinary, e.g. I'm purchasing electricity and internet services while answering this question and I really don't think about it. At the end of the month we just pay the bills. We usually only notice that we are paying for these services when a big storm comes and the electric system crashes, and we start to complain why don't they build better systems.

When we go to the supermarket or a grocery store we just pick the things we like and pay for them. I guess we have a pre-established idea of how much things should cost and only notice their price when they change (e.g. offered at a discount or its price suddenly increases a lot).

Although that doesn't apply to all our expenses, when we shop for clothes, electronics or pay gas, we really pay attention to the price. I guess that since clothes are something you don't buy everyday or every couple of days, I guess once a month at most. We usually compare the price of clothes and electronics a lot, internet websites are very useful for this. Since there are several gas stations near our house (3 in total), we usually go to the cheapest one since we spend a lot on gas (about $300 a month).

I guess that the goods and services we buy are priced differently:

• For example, utilities and cable + internet do not have a lot competition around, so the price is set by the service provider almost at free will. The utilities are a monopoly and their are only 3 cable and internet service firms here and they all have similar prices.
• We usually buy groceries at the same place, every time. I guess that some time in the past we compared the prices of the supermarkets and decided that this one was had the lowest prices. We usually get weekly offers through our email and we notice some prices are different.
• Finally where we notice a lot of price competition is when we buy clothes or electronics, that is why we double check to find the cheapest place to buy.