Uncategorized Consumer purchasing power
Consumer is the king of the market. Without consumers there is no reason to update and conduct a lot of research in order to know what exactly they want? It is extremely mind boggling to actually know their needs and wants. Any business who gets a deep insight of what the consumer wants, profits in the long run. Consumer purchasing power is just the amount they are willing to buy goods or services. Consumer purchasing power helps directly with the company’s growth and prospects.
Understanding consumer’s wants directly affects the purchasing power. Their purchasing power is in the hands of their wants and needs. 3,87,500 inr per year is the average salary in India. As the product remains in between these figures, the consumer chooses to buy the product.
What is purchasing power?
Purchasing power is the value of money depicting in terms of numbers of goods and services that one unit of currency can buy. The consumers and their wants directly influence the purchasing power. They think that if the product is of good quality and the prices are nominal, then they will invest in it. As discussed above an average Indian earns about 3 lac inr per year. Because this is very low, companies should focus on being in the price range. As the value of USD increases and Indian rupees decreases , the purchasing power also lowers. Companies should keep their prices in such a range that if inflation occurs, there is no hassle.
Factors affecting consumer purchasing power?
Supply and Demand-
As the prices are very nominal thus the demand increases, while demand is in surplus. while on the other hand when the prices are higher, people will think about buying the product and thereby reducing the product.
Change in prices-
As the inflation occurs the owners increase their prices thereby reducing the purchasing power of the consumers. While in the case of deflation occurs thereby increasing the purchasing power.
Consumer purchasing power solely depends on people’s real income. As the average income increases the freedom to purchase more also increases. Therefore more the real income of people more will be consumer purchasing power.
Taxes take away from people’s real income. As the taxes increases the consumer purchasing power decreases. Consumer will get more chance to buy if the taxes are kept nominal . This increases the purchasing power.
Exchange of currency-
If two countries exchange currency is very different from one another then it will affect the exchange currency. Business owners who are dependent solely on imports and exports will suffer the most when some countries exchange currency increases.
What is purchasing power parity (PPP)?
Purchasing power parity is an economic principle that shows the comparison of different countries currencies to one another. It is a rate at which you can buy goods or services with different currencies. In simple words it is the currency to be exchanged with other currency to buy the same level of that particular good or service. For e.g. you are an Indian and you want to buy a product from USA, purchasing power parity will show you how much Indian money will take to buy that particular product in dollars.
Uses of PPP?
- Helps compare gross domestic product of different countries as it can help adapt the distinction in the utility of different countries.
- Helps in making predictions of the future that is uncertain. PPP helps in getting an insight of which economy is better than the another. Therefore it helps in deriving out relevant policies for exchange.
What price to choose for the monopolistic competition?
As the environment is dynamic and keeps on changing, therefore companies should stratergise their pricing policy. The pricing should be kept according to uncertainty that can happen in future. As there is a pool of competitors available, company should also keep that in mind. If the inflation occurs, value of goods you can buy per unit will also decrease. Hence, price range should be kept nominal, better than the competitors and also in profit range. Consumer always focuses on the price range and how much quantity they can buy for that much value. The prices should be kept in very effective manner that if the Indian price drops in value then also it does not affect the consumer purchasing power.
What product price should be kept?
Through consumer’s point of view and needs, the product price should be kept. If the inflation occurs consumer purchasing price significantly drops. As this has the tendency to drop, companies should keep the prices so nominal that it does’t effect their sales. As the prices are so nominal, the demand will still be constant even if inflation occurs. Price ranges are directly linked to the consumer wants and satisfaction. Consumers will see if the needs and demands are fulfilled with price kept so nominal and buy more. Thus increasing the sales of the company in turn.
Our company Prodemy India focuses on keeping the prices nominal and providing effective and efficient work.
As we already know that consumer is the main focus. Purchasing power depends upon inflation, real income and also consumer preferences. As the consumer demands, it has a direct impact on exports and imports. This increases the Gross domestic value of the country and also lower the exchange rate. All in all increases the consumer purchasing power.