Price functions: useful information

Consider the functions of price in a market economy. Why is this necessary? To understand the essence of such a phenomenon as price, without this, in principle, is impossible. Initially, it should be noted that the price functions, as well as the ways in which they are realized, largely depend on the nature of the particular economic environment. The operation of the entire price mechanism is important.

The essence and functions of the price

The very first function, as a rule, is called the measuring one. It allows you to accurately determine the value of a particular product, that is, it shows how much the buyer will have to pay for a particular item or service. Prices for purchase and sale acquire a certain quantitative certainty.

The price functions include the commensurate function. Here everything is based on the comparison of the value of various goods. When comparing, it is possible to determine which services and goods are more expensive, and which are cheaper. The price should adequately reflect the utility. If this rule is violated, there may be big problems with the sale.

The next function is accounting. The fact is that price is an auxiliary accounting tool. Let's explain: just write down on a sheet of paper how much in the building of computers, machine tools and other, however, their overall utility without a price can not be determined. Price - a meter that allows you to express anything in the money.

What other price functions exist? It is the regulator of economic processes. The fact is that in market processes it is through prices that the optimal balance between supply and demand is achieved.

The price favorably affects the expansion of production of any missing goods, and it also helps to reduce the production of goods that are redundant. In a command economy, prices are always imposed, and in the market they are often formed on their own. Of course, people take a direct part in their formation, however, it is simply impossible to keep track of everything.

The price functions also include a social function. The essence here is that the price depends on how much and what kind of benefits will be given to those or other people. Prices depend on the consumer budget of the family, as well as the subsistence level in certain countries. It is easy to guess that a rise in prices will lead to a direct reduction in the standard of living.

Also important are the external price functions. Prices are formed in the national economy of the country, but also perform foreign economic functions. They are instruments of trade transactions, mutual settlements between some countries and so on.

In any economy, price has a stimulating function. It affects the manufacturer, forcing him to create or vice versa not to create any goods.

In the command economy there is a planned function. In its market, of course, no.

In general, price is an objective category, which is conditioned by the operation of the laws of money circulation, offers and demand. Do not try to impose your prices, as in developed countries they must be formed on their own.