How much do you like cheap goods or services?

The easiest and most common type of competition is price competition and the economic golden rule tells that when the price of a good decreases, people’s demands for the good increase. However, do people always look for goods and services with the lowest prices? I previously suggested that when the prices of some goods and services are very affordable and the qualities matter the utility of uses, people will balance their requirements for qualities and prices; and I maintain my point of view.

Under different circumstances, people weight their preferences towards quality and price differently. Usually people weight the importance of qualities of products when the products require complicated producing processes. This is because products with complicated producing processes have more differentiations between similar types of products, as companies may have different processes to produce their products and different qualities can be made. Moreover, such products are not one-time consumer goods or services, they are usually consumer goods that consumers demand for their long term purposes. When a product is consumed from satisfying long term demand, consumers will judge the costs of consuming such products over the products’ using time periods. When a good can be used for a longer time period, the average cost of consuming the good over the using time period is relatively low. On the other hand, if a good can be only used for a short time period, the average cost of consuming the good over its using period is relatively high. If we believe a good with a better quality can have a longer using period, our expected average time period cost is lower. From this point of view, the quality determines the average time consumption cost, and people choosing products with better qualities is still a price choice.

In addition, different qualities represent different functions of these products. Sometimes when a product has better quality, it has more functions than its competitors. Because of the extra utilities gained from consuming this product, people will decide whether the additional functions match their preferences and demands or not. If these additional functions meet consumers’ urgent demands, the consumers are more willing to pay extra money for the additional functions.

Overall, choosing between quality and price is still depend on the price judgment; however, such price judgment is more than short term price judgment, it also involves price judgment over long time periods and price judgment across different functions.