DEFINE THE TERM PRICE? IN 1000 WORDS.
Price is a value that will purchase a definite quantity, weight, or other measure of a good or service. In commerce, price is determined by what (1) a buyer is willing to pay, (2) a seller is willing to accept, and (3) the competition is allowing to be charged. With product, promotion, and place of marketing mix, it is one of the business variables over which organizations can exercise some degree of control. It is a criminal offense to manipulate prices (see price fixing) in collusion with other suppliers, and to give a misleading indication of price such as charging for items that are reasonably expected to be included in the advertised, list, or quoted price. Also called sale price and selling price.
The term price is the quantity of payment or compensation given by one party to another in return for goods or services.
In all modern economies, the overwhelming majority of prices are quoted in (and the transactions involve) units of some form of currency. Although in theory, prices could be quoted as quantities of other goods or services this sort of barter exchange is rarely seen.
Price can sometimes alternatively refer to the quantity of payment requested by a seller of goods or services, rather than the eventual payment amount. This requested amount is often called the asking price or selling price, while the actual payment may be called the transaction price or traded price. Likewise, the bid price or buying price is the quantity of payment offered by a buyer of goods or services, although this meaning is more common in asset or financial markets than in consumer markets.
` Economists sometimes define price in a more general or abstract sense to the widely understood definition above. According to this view, price is defined as the ratio between the quantity of goods that are exchanged for each other in a transaction.
For example, consider the case of two people exchanging goods, say 5 apples for 2 loaves of bread. An economist might say that the price of apples was 2/5 = 0.4 loaves of bread. Likewise, the price of bread would be 5/2 = 2.5 apples. Hence if we consider that currency is simply another type of good like apples or bread, then this conception forms the general case of the widely held definition outlined above.
However it is far from clear that this generalisation serves any useful purpose at all. As noted above, in all real economies prices are virtually always quoted in (and transactions always involve) units of currency. Hence, an alternative view is that the most basic and general definition of price is that involving exchange of goods or services for money, and that the exchange ratio between two goods is simply derived from the two individual prices.
The exchange ratio is sometimes referred to as the real price, while the price quoted in money referred to as the nominal price.
From this point of view, a price is similar to an opportunity cost, that is, what must be given up in exchange for the good or service that is being purchased. For example, if x=1 and y=2, the relative price of x in terms of y is 2, and the price of y in terms of x is 0.5.