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 marketing 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 bucks.

 

The psychological trick of seeing a oneinstead of a two at the front of a price, as in $19.99 versus $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.