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.
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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)
“The earth only has so much bounty to offer and inventing ever larger and more notional prices for that bounty does not change its real value.”
—Ben Elton (b. 1959)
“It is commonly said by farmers, that a good pear or apple costs no more time or pains to rear, than a poor one; so I would have no work of art, no speech, or action, or thought, or friend, but the best.”
—Ralph Waldo Emerson (1803–1882)
“I really know nothing more criminal, more mean, and more ridiculous than lying. It is the production either of malice, cowardice, or vanity; and generally misses of its aim in every one of these views; for lies are always detected, sooner or later.”
—Philip Dormer Stanhope, 4th Earl Chesterfield (1694–1773)