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Difference between price, cost and value

febrero 7, 2020

The price it can be understood as the money or the amount to be paid in order to obtain something. The cost the amount incurred in the production of goods, that is, the monetary value of the resources involved in the production of something. Vice versa, the value implies the utility of the value of the service goods for an individual.

A market a place where millions of products and services offered for sale to the public, which are of size, shape, color, nature, functioning and many other different aspects. The first thing that comes to mind, every time we go to buy a product, what is the price of the good or service? How much? What is its value for us? There are slight and subtle differences between price, cost and value, which is important to learn. Let's take a look.

Comparative chart

Basis for comparison Price Cost Value
SenseThe price the amount paid for the purchase of any product or service.The cost the amount incurred in the production and maintenance of something.The value is the usefulness of a good or service.
ascertainmentThe price ascertained from the consumer's point of view.The cost ascertained from the manufacturer's point of view.The value ascertained from the user's point of view.
estimateThrough politicsThrough the factThrough opinion
Impact of changes in the marketProduct prices rise or fall.The cost of inputs increases or decreases.The value remains unchanged.
MoneyIt can be calculated in terms of money.It can also be calculated in monetary terms.Not calculated in terms of money.

Price definition

The price the amount paid by the buyer to the seller in exchange for any product and service. The amount charged by the seller for a product known as its price, which includes the cost and profit margin. For example, if you buy a product for Rs 250, then the price of that product.

Cost definition

The cost the amount incurred for inputs such as land, labor, capital, business, etc. For the production of any product. the amount of money spent by the company on the production of a product. For example, if a company produces shoes, the costs related to raw materials, wages, rent, interest, taxes, duties, etc. They determine the cost of the product.

Definition of value

Value the utility of any product for a customer. It can never be determined in terms of money and varies from customer to customer. For example, if you're going to a gym spending $ 1000 a month, the visa output is worth the expense, so the value you create for a gym, as far as the service offered there is concerned. Here the value its value.

Key differences between price, cost and value

  1. The price you pay for the goods or services you buy; The cost the amount of input incurred in the production of a product and the value what the goods or services pay is worth it.
  2. The price calculated in numerical terms, the cost is also calculated in numerical terms, but the value can never be calculated in numbers.
  3. The price is the same for all customers; The cost is the same for all customers while the value varies from customer to customer.
  4. The estimated price through the pricing policy; the cost estimated on the actual expense incurred for the production of a particular product, but the estimate of the value based on the customer's opinion.
  5. The ups and downs of the market affect the price and cost of any product while the value remains unchanged.
  6. The assessment of the price made with the consumer's point of view; the cost ascertained from the manufacturer's point of view while the assessment of the value is carried out from the user's point of view.

Examples of differentiation

  • Price Vs Cost If you buy a new car, the amount you pay to the seller of the car for its acquisition is its price, while the amount invested in the production of the car is its cost. Normally, the price of any goods or services exceeds its cost because the price includes the profit margin.
  • Cost V value If you are a watch manufacturer and manufacture millions of watches every day, the cost of production is your preliminary concern and not the value of the product. You can try to reach economies of scale, for example more production at lower costs. While in the customer's case, the purpose for which the watch is purchased must be respected regardless of the cost incurred for its production. A customer must feel the value of the purchase of the watch in terms of price.
  • Value V Price This can be easily explained by the popular example given by Prof. Adam Smith on water and diamonds. The water very important for us to survive still low in price, while the diamond only used for ornaments and nobody dies without it, has a very high price. The reason for this is its value, since the value of water is very much for us, available at a low price, while the value of a lower diamond for us. Therefore, it has a very high price.

Conclusion

After much discussion about these three terms, you must have found the answers to the three questions asked at the beginning of this article. Simply put, Price the money paid to the seller; The cost the amount of input involved in the production of the product and the value what the product or service pays to the customer.

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