Scarce commodities are considered much more important than commodities available in abundance hence there is a significant difference between the prices of scarce commodities and the commodities which are available in abundance. Let us now consider the demand aspect of the price theory, the demand aspect of the price theory is driven by an important factor which is how desperately a consumer is in need of that commodity or service. If a consumer is urgently in need of the service or commodity, he/she wouldn't mind spending even double the amount of money which they would have spent in normal circumstances. So the demand aspect of the price theory is all about the desire of the consumer to have that particular commodity or service at his/her disposal.
Another important aspect which is very important is the demand curve; demand curve gives a good enough indication of the will of consumers to buy the commodity or the service at that particular price. Demand curve and supply curves are studied by an organization to arrive at an equilibrium price. Equilibrium cost is the fixed cost and this changes only when the demand and supply is changed and it does not change unless the demand and supply changes.
Let us now take into consideration the difference between luxury goods and necessities, the ...
he level of income of an individual goes on to decide what luxury is and what is necessity For instance a rich person can stop buying bikes and as a replacement start collecting cars, this purely depends on the level of income of people. The word luxury has more meanings than one, one often mistakes luxury as a status symbol, for instance a person can buy a Nike shoe considering as a luxury knowing very little about how good the shoe is, so it depends on individuals on how they define luxury.
Euro Star and its Price Theory
Euro star is a high speed train which covers areas in London, Brussels and Paris. The price theory of the high speed train will be highlighted in the remaining of the paper. There are three different classes namely, the standard class, the Leisure select and the last one is Business Premier. The rates vary depending upon the class, for a journey from London to Paris it would roughly cost about 178 if one chooses to travel in Standard class, on the other hand the fare is higher if one chooses to travel by Leisure select, it would cost roughly about 325 if one chooses a two way journey from London to Paris and back. The third and the most expensive class is the Business Premier which would cost a person roughly about 328.50 for a one way journey from London to Paris. The demand factor of the price theory comes into effect here; people opt to travel by Euro star because they have the willingness to pay for the service offered by the train. This is a very essential concept in price theory, if the people don't feel the willingness to travel by the train they will stop travelling by the train. This goes to show that the prices of the services offered by the train are quite reasonable and this is exactly why the people feel willing to travel