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In What Ways Do Perishability and Intangibility Affect the Pricing

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Essay

In what ways do perishability and intangibility affect the pricing of services?


Definitions:

Income Effect

The change in an individual's consumption choices that results from a change in their real income or purchasing power.

Substitution Effect

The substitution effect occurs when consumers replace cheaper items for more expensive goods due to changes in relative prices, holding utility constant.

Slutsky Compensated Demand Curve

Represents consumer demand by adjusting for changes in purchasing power, illustrating how quantity demanded varies with price, holding utility constant.

Ordinary Demand Curve

A graphical representation showing the relationship between the price of a good and the quantity demanded, with all other factors being held constant.

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