Confusion Between Prices and Costs of Production
Price is commonly confused with the notion of cost of production, as in “I paid a high cost for buying my new plasma television”; but technically these are different concepts. Price is what a buyer pays to acquire products from a seller. Cost of production concerns the seller’s investment (e.g., manufacturing expense) in the product being exchanged with a buyer. For marketing organizations seeking to make a profit, the hope is that price will exceed cost of production so that the organization can see financial gain from the transaction.
Finally, while pricing is a topic central to a company's profitability, pricing decisions are not limited to for-profit companies. The behavior of non-profit organizations, such as charities, educational institutions and industry trade groups, can be described as setting prices. For instance, charities seeking to raise money may set different “target” levels for donations that reward donors with increases in status (e.g., name in newsletter), gifts or other benefits. These targets can be seen as prices if they are interpreted as specifying a cost that must be paid by buyers (donors) in order to obtain something of value.
Read more about this topic: Price
Famous quotes containing the words confusion, prices, costs and/or production:
“The confusion of emotions with behavior causes no end of unnecessary trouble to both adults and children. Behavior can be commanded; emotions can’t. An adult can put controls on a child’s behavior—at least part of the time—but how do you put controls on what a child feels? An adult can impose controls on his own behavior—if he’s grown up—but how does he order what he feels?”
—Leontine Young (20th century)
“United Fruit... United Thieves Company... it’s a monopoly ... if you won’t take their prices they let your limes rot on the wharf; it’s a monopoly. You boys are working for a bunch of thieves, but I know it ain’t your fault.”
—John Dos Passos (1896–1970)
“It costs you something to do good!”
—Zora Neale Hurston (1891–1960)
“From the war of nature, from famine and death, the most exalted object which we are capable of conceiving, namely, the production of the higher animals, directly follows. There is grandeur in this view of life, with its several powers, having been breathed into a few forms or into one; and that, whilst this planet has gone cycling on according to the fixed law of gravity, from so simple a beginning endless forms most beautiful and most wonderful have been, and are being, evolved.”
—Charles Darwin (1809–1882)