3 Effects of the progression of economic value

Posted by Raju Kumar on February 6th, 2020

When man first came into existence he had very basic needs. However, as time passed the needs and wants of men increased. Along with the needs, there was also an increase in the buying capacity of the people. The progression of economic value describes the relationship between the needs of a person and the pricing of a commodity. It states that as the wants of a consumer increase, there will be a proportional increase in the price of a commodity. The following are the effects of the progression of economic value:

Price increases with the number of services

This means that if the number of services over commodity increases then the price that will have to be paid for the commodity will also increase. For instance, the coffee bean is a raw material. There is an increase in the price of the coffee after a manufacturer grinds, packages and sells the product. It is found that the price further increases after brewing the coffee. In addition to this, if a customer visits a five-star restaurant like Starbucks, then it can be found that the consumer has to pay an even higher price when he consumes the coffee from the restaurant.

Profit decreases towards the bottom of the chain

Another effect of the progression of economic value is that the people that are present in the lowest portion of the chain often do not get as much profit as the people who are present in the higher tiers.From the above, it is clear that the people at the lowest portion of the chain get the minimum profit. For instance, the people that are engaged in growing the product or the shopkeepers are hardly able to get any money. However, the people at the higher portion of the chain like the restaurant owners or the people who sell the coffee after brewing the coffee can earn a larger profit.

People get better service if they are ready to pay more

From the above, it can be understood that people who are ready to pay more get better services. For instance, if a person is ready to pay a high price to a five-star restaurant like Starbucks he can comfortably wait in the A.C. until the coffee is made. In addition to this if a person wants to get brewed coffee then the price that he will have to pay is more than the price of ground and packaged coffee. Thus if a person is ready to pay more, he can get more services.