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Effects On Purchasing Power Of A Customer Due To Discount


What is purchasing power? Purchasing power is nothing but the price of products and services that can be purchased with a unit of currency. Purchasing power is vital as a result of, all else being equal; inflation decreases the number of products or services you’d be ready to purchase.

To measure purchasing power within the ancient economic sense, you would compare the worth of a good or service against a price level like the consumer price index (CPI).

Purchasing power affects each facet of the political economy, from customers shopping for merchandise to investors and stock costs to a country’s economic prosperity.

In straightforward terms, Discount is an allowance or concession in value. Discount is given to the client is evoked (lured) to position an order and later to create a payment in time

Discount will be additionally noted as a reduction in value. The vendor deducts the discount from the gross or total value, and therefore the customer is meant to pay the net amount.


The aim of this project is to determine the effects of discount on purchasing power. It is the most important topic of the economy today as it is one of the key reasons for major changes in the economy.


  • To find out how discount affects the economy
  • To know the impact of discounting strategies on purchasing power
  • To understand the strategies of discount used to affect the customer mindset about the product
  • To find out that discounting strategies are not fraud way to earn more money
  • To see the aspects of discount most used in today’s world and how they have an impact on an economy


The method used in this project to understand the basic impact of a discount on purchasing power
is the Survey method. The research for the survey is done on internet. Internet is considered as a
vast source of data. With the help of internet we gathered information on this project. The
questions below cover all the points gathered during the survey. The questions and answers are
both found on internet on various sites. Extensive research is done by using the internet to get the
right answers to all the questions given below.


  1. What is purchasing power & discount?
  2. What is a discount pricing strategy?
  3. How the discount affects the purchasing power?
  4. How discount has a major effect on the economy?
  5. What are the advantages and disadvantages of a discount?


The details of this report are as follows

What is purchasing power & discount

Purchasing power refers to the number of products and services a set amount of cash can buy. The purchasing power of the dollar is said to changes in costs for various merchandise and services. Printed value indices periodically live the costs of commodities, retail costs, and costs for the economy as an entire. Once costs for commodities increase, the purchasing power of the goods dollar decreases. Once retail costs increase, the purchasing power of the retail dollar decreases. And once costs for the economy as an entire, as reported within the consumer price index (CPI), increase, and then the purchasing power of the buyer dollar decreases.

In investment terms, purchasing power is that the dollar amount of credit accessible to a client to shop for extra securities against the present marginal securities within the brokerage account.

Discounting is the method of deciding the current price of a payment or a stream of payments that are to be received within the future. Given the time value of cash, a dollar values additional today than it might be price tomorrow. Discounting is the primary issue utilized in evaluation a stream of tomorrow’s money flows.

For example, the coupon payments found during a regular bond are discounted by a particular rate of interest and added along with the discounted price/face value/nominal value to work out the bond’s current value. There are 2 types of discounts: Trade discount & Cash discount.

What is a discount pricing strategy


A pricing strategy is a crucial component of a profitable business. over the other element, a pricing strategy directly impacts the number of profit you create. select a pricing strategy that helps you meet your sales objectives, enhances your complete perception and provides the most effective profit purpose for market demand. a reduction pricing strategy is beneficial for driving traffic and sales short term but used as a long-run strategy, discount pricing has some negative effects on market position and complete loyalty.

Businesses use discount pricing to sell affordable merchandise in high volumes. With this strategy, it is vital to decrease prices and stay competitive. massive retailers are ready to demand value discounts from suppliers and build a discount pricing strategy effective as they render bulk. it’s typically not possible to contend with these retailers primarily based only on a discount pricing strategy.

Proceed with discount pricing ways cautiously. Discounts used too usually begin a downward pricing spiral that will eventually harm your ability to sell the merchandise at full value. As an example, if a distributor has periodic giant discounts then it’s going to condition your market to attend for these sales, lowering profit margins.

How the discount affects the purchasing power?

Price perception is everything. If the customers assume that they’re obtaining a deal, then they’re going to be additionally inclined to form a buying deal. Who doesn’t love discount products? In line with INVESCO, discounts will have an enormous, positive impact on your sales.

A client can presumably resolve to shop for a product if they see that the value tag has been discounted. Normally, the client isn’t involved whether or not the discounted tag is really less than the worth of the merchandise. The mere feeling that they’re shopping for one thing at a discount} price is enough to steer them to position an order. This can explain why an amazing majority of customers concentrate on promotions, discounts, and coupons.

As shortly as there’s a discount, they’re going to act. As a matter of reality, nearly half-hour of shoppers says a coupon is enough to shut the deal. Moreover, eighty-three of shoppers say they might principally click an advertisement if it offers a promotion or discount. Many experiments have shown that thoughtful discounts work. So long as shoppers believe they’re obtaining an equivalent quality and amount at a cheaper price than the previous one or the competitor’s one, sales can increase.

This is way discount factors affect the purchasing power. The effects of discount on purchasing power, in general, are so wide and powerful that it affects the economy as a whole.

How discount has a major effect on the economy

Setting a high discount rate tends to own the impact of raising alternative interest rates within the economy since it represents the price of borrowing cash for many major industrial banks and different facility establishment. This might be thought-about contractionary financial policy. Precisely how much a high discount rate affects the economy as an entire depends on the link between the discount rate and also the traditional market rate of interest for loans to banks.

More instantaneous impacts are felt from a high discount rate. Loans are costlier, and borrowers have to be compelled to work to pay off loans more quickly. This has the impact of taking cash out of the economy that might additionally cause costs to decline. People are inspired to save lots of more. This results in a rise in capital funding. Whether or not this helps or harms the economy depends on several alternative factors and is extremely tough to determine.

What are the advantages and disadvantages of a discount

  • Advantages:
  1. A rapid way to steer Sales
  2. Lure New Consumer
  3. Clear Out previous Stock
  4. Building a Relationship with faithful Consumer
  • Disadvantages:
  1. Shifting target value
  2. Lowered Perceived price
  3. Low Profit
  4. Inviting the incorrect Attention



  • https://en.wikipedia.org/wiki/Purchasing_power
  • https://brainly.in/question/2440103
  • https://www.referenceforbusiness.com/encyclopedia/Pro-Res/Purchasing-Power.html
  • https://www.investopedia.com/terms/p/purchasingpower.asp
  • https://www.unleashedsoftware.com/blog/discount-pricing-strategy-explained
  • https://smallbusiness.chron.com/discount-pricing-strategy-794.html
  • https://www.business2community.com/consumer-marketing/discounts-affect-online-consumer-buying-behavior-infographic-01575471
  • https://www.investopedia.com/ask/answers/013015/how-does-high-discount-rate-affect-economy.asp
  • https://blog.aftership.com/pros-cons-of-discounting/

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One comment

  1. Thank u so much it helps me very much

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