Cost Equalisation

Cost Equalisation is the idea that the cost of goods and services will over time equal out and cost equalisation will be achieved.

It is typical that when a product is introduced into the market place that the price will be effected by both the quantity produced and the demand. As demand increases larger quantities are produced the unit price of the goods or service falls.

As economies of scale come into effect and the demand for the product increases the cost of producing the good or service will decrease and so will the price. Also producing the goods or service in a different region where salaries, wages and materials are cheaper will allow for a stronger competitive margin. Over time the costs in the different market regions will level off as overheads level and transportation to the market place are taken into account. The result of this action is that cost equalisation will come into effect as the price of the goods or service reaches its ultimate market price.

Sometimes there is a difference in price in different regions for a product which are brought on by material, labour, transport costs and geographic location this will eventually over time level off due to the factors of demand and salaries in each region.

Cost equalisation is the fusion of all the factors of production to arrive at a level price in the market place when all factors have been taken into account.