Market price Text a
Prices play an important role in all economic markets. If there were no price system, it would be impossible to determine a value for any goods or services. In a market economy prices act as signals. A high price, for example, is a signal for producers to produce more and for buyers to buy less. A low price is a signal for producers to produce less and for buyers to buy more. Prices serve as a link between producers and consumers. Prices, especially in a free market system, are also neutral. That is, they favour neither the producer nor consumer. Inslead they come about as a result of competition between buyers and sellers. The price system in a market economy is surprisingly flexible. Untorseen events such as weather, strikes, natural disasters and even war can affect the prices for some items. When this happens, however, buyers and sellers react to the new level of prices and adjust their consumption and production accordingly . Before long , the system functions smoothly again as it did before. This flexibility to absorb unexpected «shocks» is one of the strengths of a free enterprise market economy.
In economic markets, buyers and sellers have exactly the opposite hopes and intentions. The buyers come to the market larger to pay low prices. The sellers come to the market hoping for high prices. For this reason, adjustment process must take place when the two sides come together. This process almost always leads to market equilibrium — a situation where prices are relatively stable and there is neither a surplus nor a shortage in the market.
Market price Text В
In most economic systems, the prices of the majority of goods and services do not change over short periods of time. In some systems it is of course possible for an individual ,to bargain over prices, because they are not fixed in advance. In general terms, however, the individual cannot change the prices of the*bommodities he wants. When planning his expenditure, he must therefore accept these fixed prices. He must also pay this same fixed price no matter how many units he buys. A consumer will go on buying bananas for as long as he continues to be satisfied. If he buys more, he shows that his satisfaction is still greater than his dislike of losing money. With each siiccessive purchase, however, his satisfaction compensates less for the loss of money.
A point in time comes when the financial sacrifice is greater than the satisfaction of eating bananas. The consumer will therefore stop buying bananas at thecurrent price. The bananas are unchangeed; they are no better
or worse than before. Their marginal utility to the consumer has, however, changed. If the price had been higher, he might have bought fewer bananas; if the price had been lower, he might have bought more.
It is clear from this argument that the nature of a commodity remains the same, but its utility changes. This change indicates that a special relationship exists between goods and services on the one hand, and a consumer and his money on the other hand. The consumer's desire for a commodity tends to diminish as he buys more units of that commodity. Economists call this tendency the Law of Diminishing Marginal Utility.
Market price Text С
In economics, the term «price» denotes the consideration in cash (or in kind) for the transfer of something valuable, such as goods, services, currencies, securities, the use of money or property for a limited period of time, etc. In commercial practice, however, it is normally restricted to the amount of money payable for goods, services, and securities. In other applications, the word «rate» is preferred. Interest rate is the price for temporary use of somebody else's money, exchange rate is the price of one currency in terms of another.
Price may refer either to one unit of a commodity (unit price) or to the amount of money payable for a specified number of units or for something where units are not applicable, e.g., for five tons of coal (total price) or for a specific painting by Rembrandt.
Prices perform two important economic functions: they ration scarce resources, and they motivate production. As a general rule, the more scarce something is, the higher its price will be, and the fewer people will want to buy it. Economists describe that as the rationing effect of prices. In other words, since there is not enough of everything to go around, in a market system goods and services are allocated, or distributed, based on their price.
Price increases and decreases also send messages to suppliers and potential suppliers of goods and services. As prices rise, the increase serves to attract additional producers. Similarly, price decreases drive producers out of the market. In this way prices encourage producers to increase or decrease their level of output. Economists refer to this as the production-motivating function of prices.
Prices may be either free to respond to changes in supply and demand or controlled by the government or some other (usually large) organisation.