What factors determine the price of goods?
The price of a commodity fluctuates around its value.
How does the price fluctuate around value? What factors affect it?
1. Specifically, the price is determined by 4 different factors.
These four factors affect the price level at different levels.
The first factor affecting prices is cost.
The higher the cost, the higher the price.
Production costs will decrease as the level of technology improves, and prices will also decrease accordingly.
Let me give the simplest example.
In the past, a person could chop a tree a day.
Later, with a better axe, you can chop two trees a day
Later, with a chainsaw, 20 trees can be cut a day.
In the future, with artificial intelligence, robots can chop 2,000 trees a day.
With the continuous development of science and technology, labor productivity has greatly increased. From cutting one tree a day, to 2 trees, to 20 trees, to 2000 trees.
At this time, the price of a tree will continue to decrease along with the comprehensive cost of cutting the tree.
Give another example.
The French Emperor Napoleon used very fine silver tableware to entertain the guests.
On the other hand, he only uses aluminum tableware.
You know, silver is more valuable than aluminum.
Many people think that Napoleon used aluminum tableware because of his low-key simplicity. In fact, it was the opposite.
In that era, tableware made of aluminum was a symbol of noble status.
Because the cost of aluminum refining is extremely high and aluminum tableware is very rare, it is expensive, even more expensive than gold.
Now, the technology of aluminum smelting has advanced by leaps and bounds, and aluminum has become very cheap. And because of the scarcity of metallic silver itself, the value of silver greatly exceeds that of aluminum.
Therefore, the cost affects the price.
And technology changes the cost.
2. The second factor affecting prices is the relationship between supply and demand.
for example.
Valentine’s Day roses are several hundred yuan a bouquet. Once the festival is over, there is no demand, and the price of roses will drop sharply.
Apples usually cost 2 yuan a catty. On Christmas Eve, because of the reduced supply, apples become 5 yuan a catty. As soon as Christmas Eve was over, the supply returned to normal, and Apple dropped to 2 yuan per catty.
Suppose one item is produced only 10 pieces.
If there are only 10 people in the market, and supply and demand are balanced, everyone can buy it.
If there are 100 people in the market who need it, the price of the item will go up.
If there are 1,000 people in the market who need it, the price of the item will go up even higher.
Therefore, it is more profitable to sell a commodity that is in high demand but in scarce supply.
For example, houses.
Is it very high-tech to build a house?
No.
However, there are only so many houses within the central district of Shanghai, but the price is very expensive. The central, inner and outer rings, in terms of building a house, cost the same.
So why can houses in different locations be sold at different prices?
It is because everyone wants to go to the city center, and the demand is very strong, while the supply of housing in the central area is scarce.
With scarce supply and strong demand, the price will be very expensive.
This is the second factor that affects prices, the relationship between supply and demand.
3. The third factor affecting prices is efficiency.
The online shop sells tea, which sells well, but it is not expensive.
Why?
Because it’s efficient.
They get the tea directly from the source of the supply chain. They did not open offline stores, did not hire salespersons, and did not advertise, which reduced many intermediate links.
So that’s efficiency, that lowers the price.
The same demand, the same production cost, but different operating efficiency, the price will be different.
Why are some things on the Internet good quality and cost-effective?
That’s because selling things on the Internet is more efficient, so the price will be cheaper.
This is the third factor affecting prices, efficiency.
4. The fourth factor that affects prices is information.
You go to the wholesale market to buy something, usually, the salesperson will look at you up and down, and then give you a quote.
Then you will start bargaining.
In the end, the price at which everyone buys this item may be different.
Buy it for your mother, it will almost certainly be cheaper than the price you bought.
Why?
Because the information is asymmetric.
When information is asymmetric, there will be producer surplus and consumer surplus.
what’s meaning?
That is, there is a certain space between your psychological price and the seller’s cost.
If the purchase price of the item is 5 yuan, and then you think it costs 20 yuan, you are willing to buy it.
For the seller, he can sell for 20 yuan, but theoretically he is willing to sell for 6 yuan.
The final price depends on your ability to bargain.
If the seller has a strong bargaining power, the last 15 yuan will be sold to you.
You think it’s not bad, it’s cheaper than you think. At this time, you have a consumer surplus of 5 yuan.
And if you have a strong bargaining power, and finally you buy it for 8 yuan, you will have a consumer surplus of 12 yuan.
Through constant bargaining, the two sides test each other’s bottom line and finally determine the price of the transaction.
Therefore, the price level is also related to the information gap between the two parties.
This is the fourth factor that affects prices, information.
So
Cost, supply and demand, efficiency, information.
These are the 4 factors that affect prices.
Now you should know that the expensive and cheap of a commodity is caused by many reasons.
Prices will fluctuate around the value.
How to fluctuate is determined by the four factors of cost, supply and demand, efficiency, and information.
These factors converge, and finally reflect a common result, that is price.
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