Price

The price ( going back to Latin pretium ) is usually realized in monetary value of a good or service. The result of estimation is always a value and not price. The estimated (traffic) value of an object is determined by orientation of comparable properties and, therefore, remains abstract. The term price is objective and concrete. It manifests itself only when actual sale. As long as the value is not realized, it represents only a money claim from the provider or a bid price of demander dar. Only when some buyers and sellers in the negotiation process to a certain value and conclude a sale, created the realized price.

Consumers often without consent Price negotiating the asking price from the seller a (so-called implied action ). The award, which leads to a free market between multiple buyers and sellers to the market equilibrium between supply and demand is called the market price or equilibrium price.

• 2.1 Components of a price

Price functions

Indicator function

The indicator function is also called the shortage function or signal function. Prices are in particular considered in economics as indicators of the scarcity of goods. A rising price signals the suppliers increased demand and thus an attractive market.

Example based on price - volume sales function:

Coordination function

This price function is also called the regression function. Households and businesses use the price to harmonize their individual plans with each other.

Example based on price - volume sales function:

Allocation function

Prices direct the production factors ( labor, land, capital) in the sectors where they are most needed. The allocation function provides enterprise for efficient use of scarce resources.

Example: poaching of workers by companies during the so-called super boom at the beginning of the seventies by paying higher wages.

On the supply side

A higher price is for the company is a motivation to produce the corresponding asset. These are typically factors of production are re - allocated, that is, from the production of other, low -priced ( because less demand ) is deducted and invested in the production of the current good goods.

The equilibrium price formed by supply and demand ensured with appropriate assumptions and the normative objectives of the neoclassical school that the existing at a given time factors of production (eg, labor) are used where they provide the greatest benefit ( efficient allocation ). At low prices, the company stops production.

Example based on price - volume sales function:

On the demand side

Due to low prices, the customer should be encouraged to acquire a good. With the question of how incentives are set using the pricing is concerned, the pricing policy.

Selection function

With a decline in demand decrease price and sales volume. This results in losses in the non- economically operating companies. These lead either to a shakeout, as these companies switching production, must file for bankruptcy or to structural crises affected industries.

Pricing

Price formation in a free market polypolistic done theoretically by the interaction of supply and demand, assuming that market transparency is. In this concept it is assumed that the price to a competitive market levels off so that it balances supply and demand; the resulting price-quantity combination is the market equilibrium. When supply exceeds demand, the price drops. At this lower price, customers are more willing to buy the product, but fewer providers willing to offer the estate. Demand increases and supply decreases, so that an equilibrium is reached again.

Prices arise every time the buyer and seller enter into a contract on the monetary value of a transferred goods ( product, service, claim). Everyone realized price represents the result of the negotiation on the asking price of a provider and a consumer are price bid represents the merchants of this market-based price formation process with all its situation and makes specific influences of the dynamic " market aspect ratios " familiar. However, most consumers it is not (more) aware of because they do not negotiate a rule on the effective price level, but explicitly or implicitly ( through actions implied ) consent to the asking price of the provider. ( Schenk) Accordingly, the price is as the price of securities and the interest rate as the price of bought or money lent.

With decreasing number of providers and purchasers of a commodity price formation of the principles described above differs from and is discontinuous. In a unilateral monopoly of the provider or the recipient alone determines the price and in a bilateral monopoly pricing is often arbitrary.

Components of a price

• Raw materials: cost of raw materials from which the product is
• Energy: Electricity costs for the production
• Wages: labor compensation for the performance of the employee
• Marketing: to increase awareness
• Logistics: transport costs
• Storage: storage costs
• Cost of capital: interest rate for production necessary capital loan

Costs (minimum) and desirability ( maximum)

Costs: Costs are the price floor if you want to gewirtschaftet without loss. For sales, the costs are but not all. Add to that the desirability of a property in order to achieve gains beyond the imputed interest and the imputed wage ( components of the cost price ).

The desirability of a good is his appreciation to transfer a certain amount of money to the provider. There are phases in the economy, for example, if the expectations of customers are affected by a negative assessment of the future, to postpone the purchase of a good or not to pass up. If goods are offered worldwide, then the exchange rate comes into play. Therefore, the currency relationship must be part of calculations.

Exchange rates

The goods can be offered in different currencies ( euros, U.S. dollars or yen). The conversion of a commodity in the local currency may lead to a price advantage which makes them particularly attractive for the good buyers. Thus, an arbitrage benefit can be realized. However, this advantage is smaller when the demand for goods from a particular currency area leads to a strong demand for foreign currency and thus more expensive, the price of foreign exchange.

The supplier / seller or buyers / buyers in an area ( for example, euro area) can realize significant price advantages by different cost for each region when the currency relationship has been overridden. A buffering of cost differences by national currencies omitted in these cases.

Special price labels in the trade

Specialties

The pricing policy pursued as a sale price policies mainly aim to put up with the help of pricing incentives, while it aims as purchase price policy, by means of distributive consideration and / or through negotiations on the reduction of purchase prices. It can be direct and indirect pricing policies can be distinguished. In case of direct or open price policy, the remuneration ( price points) is changed while maintaining the same performance ( Price denominator), with indirect or hidden pricing power ( Price denominator) is changed at constant charge ( price points).

The price psychology plays particularly in trade and trade marketing a large role in all management decisions on purchase or selling prices as well as trade margins are reviewed and psychologically. There are many psycho strategic and psycho tactical pricing decisions are available ( prices range systematic transcripts, unit price, unit costing, compensation calculation, price presentation, price optics, discount price, price guarantee, price negotiation - make a bid policy - Awakening of price expectations )

Price optimization refers to any process that shape the existing prices in the production program of a manufacturer or a dealer in the range so that arise for the seller by changed buying behavior better yields.

Before a product is launched in the market, a commitment to a pricing strategy should be.

A price index is a statistical construct that allows a statement about the development of the price level and the rate of inflation in the economy as a whole or in an economic sector.

The price comparison is a (usually printed ) juxtaposition of at any given time empirically determined prices for identical goods or similar services of various supply and demand for the same purpose ( sales or purchase purpose). Juxtapositions of selling prices, intended as a consumer policy tool to improve the market (price) survey for consumers and reduce their information costs, the local or regional compared prices for insulated goods assets not reflect the performance of recognized providers in the commercial exactly, mainly because many economic and methodological implications ( Schenk 1981). After early attempts in the 1980s set the price comparisons are creating consumer organizations, the process again. The so-called price started by agencies and operators of (price) search engines online price comparisons for certain goods and services from online vendors, however, have found widespread use and acceptance.