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Course: Financial Literacy > Unit 2
Lesson 2: Reducing expensesWhat is the better deal?
Per-unit pricing is a way of breaking down the cost of something so you can compare it to other similar products. It helps you figure out which one is cheaper or a better deal. Created by Sal Khan.
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Would it make sense to buy more than you need just because it is a better deal? Or should you buy it if you are able to use the amount?(21 votes)
It makes sense to buy more if you can save it up and use it next month. For the shampoo example, if you don't need the extra shampoo, you can just use it next month. But this rule won't apply to things like food and other perishable goods. If you buy more than you need just to save, it'll all spoil if you don't use it.(23 votes)
Having dealt with a fair bit of dyslexia, I've had to figure out how to make sense of certain things. Such as the question, "How do you know what unit to divide by what unit?", or "Why is oz in the denominator?"
Listening to his explanation, it suddenly made sense, though. The answer is the in the question you are asking. How much PER oz does this bottle cost, versus how much PER oz does the other one cost. That PER can be re-written as a SLASH or /.
So.. how much per oz, can be rewritten as how much /oz; and now you know that the oz's belong in the denominator; so the money portion can only go in the left over spot, the numerator.
For those who don't deal with this kind of confusion; my explanation may not only seem non-sensical; but even UNIMPORTANT.
But it is. I once had a girl friend who didn't know her left from her right; so she would kinesthetically always bring up the same hand in an 'L' shape on her left side, then look to that side and make the connection that left was THAT way.
If she happened to bring up her RIGHT hand and tried to make the L, it would LOOK wrong to her; because it would be BACKWARDS! Try it and see. I'm so proud of how she came up with a way to overcome her own disability. 😎
I'm kind of the same with operations like percents to fractions or decimals or any kind of ratios and proportions.
So, I came up with a way to solve one of my learning disabilities, making it make sense to my particular type of brain.(15 votes)- Just an observation; but often when you get those bulk items, the pour spout is bigger... so if you're not careful, you wind up pouring MORE each time, than you would with a smaller bottle; so the savings either breaks even or you wind up paying MORE for the bigger bottle; because you have to factor in HOW LONG SOMETHING LASTS before you have to replenish it.
Our world is chaotic; and straight math, often doesn't account for what's actually going on. It helps. It helps a great deal; but critical thinking and experience and paying attention is what will help you make better judgment as time goes on.(10 votes)
There are many other factors you can also take into play depending on what product you are buying. You can use your budget to add more calculations to get a good understanding of what would be better for you to buy. With food there are even more things at play. You have to take into consideration the caloric count, the size, the weight, price, ingredients to see if it's worth it or if it's just a bad food, and you also have to take into consideration how bad inflation has gotten recently.(1 vote)
Isn't the unit price 5.02 cents per sq feet and not $5.02 cents per sq feet as Sal stated?(7 votes)
Sal must have made a mistake.(3 votes)
- does quality ever over throw the cheaper option ?(3 votes)
Sometimes that is the case. The point here is to use the criterion of "quality" before you use the criterion of "cost". Paying more isn't always the best choice, but getting by on the cheap has its own problems. Trust me on that, I "cheaped my way" into lots of dumb situations.(8 votes)
Why don't they always put the amount per Oz on the item?(2 votes)- If it is legally required, it's on there. If it is not legally required, you may have to do mental math or carry a calculator with you.(6 votes)
Is the product more expensive the better quality it is?(3 votes)- A lot of things go into why things cost as much as they do. The "cheapest" is never the best quality. But after a certain level of quality has been achieved, there are still things that make some products more expensive. For example, if something is heavily advertised in expensive places (like in Super Bowl ads), the company has to get that money from its customers, who are charged more. If the packaging is extra fancy, that has to be paid for. The exact same product in a fancier case, or with higher quality paint on its exterior, will cost more, but be no better than the next priced one down the line.
So, "price" and "quality" float around in relationship to each other, but each is a moving target.(2 votes)
- how do I break down the price of the cost of a product?(3 votes)
- I do it by the unit. If it is sold by the meter, that's how I break it down. If it is sold by the ton, I use that. If it is sold by the gram, I use that. So, it all depends on the product itself.(2 votes)
- Is this like and brand vs great value thing(2 votes)
- This is not about "brand" at all. It assumes that you are purchasing bulk items (like butter, eggs, flour, coffee, cow manure to fertilize your lawn, etc.) and that all of the products, irrespective of brand, are equal.
Do not compare bargain mascara at the dollar store to the stuff at the counter on the first floor of Saks 5th Avenue. These are different things entirely.(2 votes)
- Would it make sense to buy more than you need just because it is a better deal? Or should you buy it if you are able to use the amount?(2 votes)
- Ask yourself if the "better deal" will lead you to waste product, or the "not better deal" will lead you to waste money. Then opt for the choice that leads to less waste.(2 votes)
Video transcript
- [Instructor] In this video, we're gonna play a game
that I like to call What is the Better Deal? So let's look at an example. Let's say there's a 16 ounce bottle of shampoo that costs $4. And let's say there's another bottle of that shampoo right next
to it, on the store shelf. It's the same brand, same
shampoo, just a different size. It's 35 ounces, and it costs $7. Pause this video and think
about which is the better deal. So there's several ways
of approaching this. You might see that, wow, 35 ounces is more than double 16 ounces, and the price isn't more than double $4, so this is probably the better deal, but just in case it doesn't
jump out at you that way, you could think about
something known as unit pricing or unit costs. And the way we could do that
is we could take the price, let's say in this top
example, the bottle costs $4, and then we'll divide it by
the number of ounces we have, divided by 16 ounces. You might recognize that this is going to
be 25 cents an ounce. You might be able to do
that math in your head, or you could punch that into a calculator, 25 cents per ounce. The other situation right
over here, if we took 35, or we took $7, I should say, $7 divided by 35 ounces,
if you do the math there, that is going to be 20 cents. 20 cents per ounce. And so here you're able to make an apples to apples comparison. You know where you're paying
more or less per ounce. And we can see that our initial intuition, our initial gut was right, that the larger bottle
here is indeed cheaper. And that's why you see sometimes, people like to buy the larger sizes. Sometimes they'll buy in bulk, because it's often the
case that the larger sizes, you get it cheaper per
unit, per ounce, per use, per square foot, whatever
we're talking about. Now, it is good to verify. I have sometimes been in a
store where the bulk pricing actually is not cheaper
than the less bulk pricing. So always try to do the math. Maybe you walk around with a calculator, or it turns out in many stores, they do the unit pricing for you. So this is an example of a price, or something that you might
see for the price at a store. And this looks like it's
some kind of, I don't know, toilet paper or something. It says six rolls of ultra comfort care, something or another. And the price here is $8.49, but they give us the unit pricing. It's right over here. They're saying $5.02 per square foot. So if there was another different size of this exact same toilet paper, you could compare it on
a per square foot basis to figure out which is cheaper. Or maybe there's two
brands that also are coming in different sizes, you can compare which is cheaper by looking
at the per square feet. It'd be more grammatically
correct to say per square foot. But I think you get the idea. And it's not always going
to be per square foot. It might be per ounce,
it might be per use. But the important thing is that you're comparing the same units to figure out which
one is the better deal.