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 This is Scientific American’s 60-SecondScience. I’m Steve Mirsky. This will just take a minute.

 

“Economics:supply and demand.”

 

That’s Father Guido Sarducci...

 

“That’s it.”

 

…sharing theentirety of the economics course at his Five-Minute-University. Of course, themarket forces of supply and demand are supposed to be the main factors insetting the prices for goods and services. But marketing¹ comes into play aswell. Supply and demand have little to do with a seller’s decision to price anitem at $19.99 instead of 20 bucks².

 

The psychological trick of seeing a oneinstead of a two at the front of a price, as in $19.99 versus³ $20 can work toincrease sales. But Robert Schindler, professor of Marketing at Rutgers Schoolof Business-Camden, says that in some cases, the penny saved isn’t worth it.

 

The $19.99 technique may actually backfirewhen a consumer is most concerned about quality, say, in a luxury item. Thepenny-lower price can then raise questions in the buyer’s mind about quality.According the Schindler, in those cases, the full, round non-99 price may senda signal of a better buy.Thanks for the minute. For Scientific American’s60-Second Science. I’m Steve Mirsky.

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