Price Essay Example | Topics and Well Written Essays - 2250 words

Price - Essay Example Price is also very import in marketing. It is one of the four variables that are considered when coming up with marketing strategy. In the marketing mix, price is the utmost factor which determines how the commodity is accepted in the market and in which market segment that product will have to be sold. It is also used by business when they are developing the marketing plan for the products. In our ordinary life we use the term price in order to refer to the amount or the quantity of payment that is made in order to acquire something. In this regard it is taken as a form of compensation that is given in exchange for something. When not referring to the economical terms, price has the same meaning of the compensating for something that has been acquired. When a criminal is arrested and incarcerated, we usually say that one has paid the price of the crime. This implies that the criminal has been compensated for the crime that has been committed. Therefore it is an exchange that is used to settle a debt. But in the economic world, price is used to refer to the exchange ratio for goods or services. It is the amount that is given in order to acquirer something which means it is an exchange reaction that is equal to what is being acquired. In this case we should not only be referring to the price in terms of the monetary exchange but it can also mean the value that is equal to something. For example when use din barter trade it would be an exchange ratio that equates the product or service that are being exchanged. In this case if we take that we have two goods x and y, the price of commodity x will be the ration y/x and in the same manner the price of y will be the ration x/y. (Buiter, 1999) However this concept has not been used always to refer to the price and there are old confusion that still compound the concept. In this case we can take that the value of a commodity of are services to be equated to the quantity countered using a common unit of values which may even have been based on imagination. This is usually done in order to compare different goods and services. This is the unit value of something. But most of the time, we usually confuse the unit value of something with price based on the fact that market values is usually counted as the quantity of a commodity which is multiplied by the nominal price of the commodity. The theory of price The theory of price was constructed in order to show how the price of goods and services is arrived at in the market. The price theory asserts that the market price of a commodity is usually based on two opposing considerations. As we have said about if we base the market price on the unit value of the product, this may not be true because the unit value may be created on imaginations. Therefore the theory of price presents factors that prevail in the market and which help to determent the common stand in the market. In this case the buyer and the seller are the two people who are involved in the whole process. It is the willingness of the buyer to buy a product or a service and the willingness of the seller to dispose that product or service that will determine the price at which they will arrive in. Therefore setting of the market price is an interactive process that involves the buyer and the seller. Therefore on one side stands the demand factor while which is based on marginal utility of the product while on the other side