Every transaction involves multiple parties. This typically includes willing and able buyers and sellers. The buyers utilize scarce resources (money or credit) to purchase products and services from sellers. It’s Economics 101. Whenever buyers and sellers come together in a market situation, opposing forces are at play.

From the buyer’s side, there is the price elasticity of demand to contend with. This basic rule posits that the higher the price, the lower the demand, all things being equal (ceteris paribus). Of course, there are always exceptions in the form of life-saving treatments, necessities, and emergency supplies. From the seller’s side, the willingness to sell increases as prices rise.

However, the market adjusts to accommodate buyers and sellers at the intersection between the demand curve and the supply curve – that’s the equilibrium point. A shift in demand can increase or decrease the price. The same applies to shifts in supply. That, in essence, is how the market works.

Buyers should always get more info before spending money – this is sacrosanct. Nobody should ever walk into a transaction blind. Prices aren’t just numbers; they’re trading signals. If you don’t know what you’re looking at, you’re handing over your hard-earned resources to someone who does.

Increasing Utility through Spending

We engage in buying and selling to increase utility value. Utility is a personal value judgment assigned to every transaction. The higher the utility value, as measured in utils, the greater the satisfaction we derive from the transaction.

But here’s where it gets really interesting: We cannot increase our utility indefinitely by purchasing more and more. There comes a point where our innate satisfaction is no longer boosted by additional purchases. Think of eating at a restaurant, for example. You can’t order everything on the menu and consume it all.

Your utility will be highest when you’re content, and will reach zero after you’ve satiated your hunger. Therefore, we must assess our needs carefully before splurging on excess or wasting resources, intentionality matters.

There’s another problem that comes into play when spending hard-earned money on goods or services. It’s known as the opportunity cost of doing business. If your discretionary income is limited to X, then that’s all you have to spend. The opportunity cost of spending X on Y is the foregone utility derived from spending that same X on Z.

It’s a basic truth with powerful implications. If we can’t have everything we want or need, we have to satisfice – sacrifice and satisfy – based on what’s best for the moment.

The Psychology of Spending and the Mirage of Value

Routine purchases don’t rely too much on psychology – think of your standard run to the grocery store, filling up your vehicle at the gas station, or grabbing a bite to eat at Wendy’s or Starbucks.

It’s usually the discretionary spending on luxury items, non-essentials, and entertainment that catches us flat-footed. Many people in the United States and around the world are familiar with hotels like Choice, Marriott, or Hilton. A good chunk of people has credit cards affiliated with these brands.

Your choice of hotel chain says a lot about how the brand makes you feel in terms of your sense of luxury, style, and reward. Ultimately, many folks are content with a clean room, a comfortable bed, and pleasant service. Guess what? That’s typically available across the board.

So why Marriott? Hilton? Choice? We choose based on personal preference. It often comes down to affordability, availability, and relatability. The same is true of the cars we drive, the neighborhoods we live in, and the entertainment we seek.

We don’t want to make the common mistake of confusing price with value. The price tag says one thing, but the perceived value of what we feel we’re getting says something else. That’s how modern marketing works. We see evidence of this all around: limited time offers, faux scarcity, and flashy packaging.

Purchasing with Your Values in Mind

Smart marketing is designed to rush us through the sales funnel and convert browsers into shoppers. That’s why we must always pause, reflect, and act accordingly. Before you reach for your wallet or purse, ask yourself: ‘Do I really need this?’ And if you do, then shop smarter. Get the best value for money you possibly can.

Marketers fully understand the power of utility. They know they’re not just selling products; they’re selling perceived usefulness, status, and convenience. We should always examine our needs and avoid internalizing the values they’re trying to project onto us. The last thing you want is buyer’s remorse.

This has little to do with the quality of the product and everything to do with what you genuinely value. If our discretionary purchases reflect our beliefs, then we ought to be conscious of that truth. When we know what matters to us, we can sidestep the marketing malarkey and make purchases with intent.