What is the factor that drives the increase in the price of a product? The first point would be the costs of production, which further depends upon raw material, manufacturing process, packaging, transport, etc. All these factors often, not necessarily, get costlier with the passage of time.
A product that has been doing well in terms of sales and generating revenue for the manufacturing company usually does not get the price hiked. In fact, a lot of companies prefer to lower the price to further increase the sale of a popular product. However, companies that are selling multiple products in one single domain often do not like only one of the products to sell they want all of them to sell. Take for example of Nokia. One of model, 3310, became so popular and that almost everybody preferred to buy this set around 6-7 years ago. Nokia lowered its price further and ultimately discontinued its production. This was because this model was impeding the sale of other sets of Nokia.
I was prompted to write this post when I was sipping tea in a thatched-tuck-shop in Noida outside my office. I bought a packet of cream-laced biscuits manufactured by Parle. Something propped up in the long term memory section of my brain during my childhood days when I use to live in a village around 20 years ago, I use to eat cream-laced biscuits on my birthday. It was not a cheap product at that time and for a child of my age, to spend 5 INR for biscuits were too much by any means. But I could not resist the taste of cream-laced biscuits manufactured by Bakeman and it was the only thing that I used to ask from my parents.
Fast forward this to our present state: I purchased the packet of cream-laced biscuits for 5 INR after 20 years. Where is the price-hike and why the biscuits are not costlier? Even toffees and candies have become costlier as compared to what they were 20 years back but good quality biscuits (almost similar, though taste is not similar) are available for the same price. What is the reason?
I could fathom only one reason behind this: the entry of new players in the biscuit industry (perhaps) kept the price in check. What do you think? I would love to receive some feedback about this.