The concept and essence of the price

The price in any economic system plays a very important role. In the administrative-command economy, prices are used as an instrument of directive influence on economic processes. In a market economy prices are the most important element of self-regulation of economic processes

► Price - a monetary expression of the value of the goods.

In the market system, price acts as a link between the producer and consumer, as a mechanism of equilibrium improving of a balance between supply and demand.

In the conditions of the market, the essence of the price appears in its functions (Table 6.5).

 

Table 6.5 - Price functions in market conditions

 

Functions	Content
Accounting	On the basis of this function, socially necessary labor costs for the production and sale of products are reflected, costs and production results are estimated
Stimulating	This function is used to improve the management system of production, develop resource-saving technologies, improve the efficiency of the organization, improve product quality; for the innovations implementation, etc.
Distributive	With the help of this function it is envisaged accountance the excise tax on certain groups and types of goods, value-added tax and other forms of centralized net income entering the state budget, region, etc.

 

Prices can be classified according to different economic criteria.

 

Classification of prices

A. By regulated degree

One of the important features of the classification of prices in a market is the degree of freedom of the regulatory impact of authorities of state control.

Free prices. The overwhelming majority of prices emerging in the market are free, because they are established on the basis of a market equilibrium between supply and demand.

Regulated prices. Along with free prices, there are regulated prices. In this case, at pricing, a significant role is played by the state, that, as a rule, limits the growth of prices for certain goods.

The state as the body of power and management can set fixed prices on certain types of goods and products.

Thus, in the market conditions there are two types of prices - free and regulated.

B. By the nature of the serviced turnover

In accordance with this classification, the following types of prices can be distinguished:

• wholesale prices of the enterprise;

• wholesale prices of industry;

• prices for construction products;

• procurement prices;

• tariffs for freight and passenger transport;

• retail prices;

• tariffs for paid services rendered to the population;

• prices serving the foreign trade turnover.

Wholesale prices of the enterprise are the prices of producers, for which they sell their products to consumers, while compensating for the costs of production and sales and receiving a certain profit.

Wholesale industry prices are the prices at which firms-consumers (organizations) pay for products to producer enterprises or to sale (wholesale) organizations.

Prices for construction products are in the form of: a) the estimated cost for project construction; b) the list price; c) the contract price.

Procurement prices are the prices at which agricultural products are sold. These prices, as a rule, are contractual in nature.

Tariffs for freight and passenger transport reflect payment for freight and passenger transportation, which is charged by transport companies.

Retail prices are the prices at which goods are sold in the retail trade network to the population by enterprises and organizations.

B. Special types of prices

In world practice, in addition to the listed types of prices, there are auction, exchange and contract prices.

Auction price is the price of any product sold at auction. This given price can essentially differ from the market price, as reflects unique properties and attributes of the goods.

Stock exchange price is the price at which the wholesale sale and purchase transaction is effected in the conditions of exchange trade; is a free price that fluctuates depending on the demand, the volume of the transaction, and so on.

Contract price - the price at which the sale of goods depending on signed agreement.

 

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