abhishreshthaa
Abhijeet S
Price, Cost & Value
The above three words are often used interchangeably in conversation. Their meanings are not identical, however, and to ensure clear thinking on the subject of prices, it is essential to appreciate the differences.
Price: is the amount of money that is paid when something is bought or sold, or when a service is provided. An article may have more than one price, (for example, a cash price and a credit price) and as we all know, the same article may have different prices in different shops. Nevertheless, the price involved in a specific transaction is usually known precisely and is the same for both the buyer and the seller.
Cost: is the amount of money that must be paid in order to obtain something. Cost may be the same as price, but it is often not.
For instance, if you buy a piece of equipment, you may pay a certain price, but before you use it you have to spend more money to have it delivered and installed. This means that costs can be additive.
That is, the installed cost is the total of the price plus deliver cost, plus installation cost.
There are many different kinds of cost of course, - total cost, marginal cost, direct cost, out of pocket cost and so on.
The purpose for which cost is to be used determines the correct cost to us.
Value: is what something is worth to something and an article can be valued in three different ways.
It can be valued as “replacement value”, which is what it would cost to replace, it can be valued as “sales value”, which is what someone is willing to pay for it, it can be valued as a “utility value”, which is what something is worth under a particular set of circumstances.
The above three words are often used interchangeably in conversation. Their meanings are not identical, however, and to ensure clear thinking on the subject of prices, it is essential to appreciate the differences.
Price: is the amount of money that is paid when something is bought or sold, or when a service is provided. An article may have more than one price, (for example, a cash price and a credit price) and as we all know, the same article may have different prices in different shops. Nevertheless, the price involved in a specific transaction is usually known precisely and is the same for both the buyer and the seller.
Cost: is the amount of money that must be paid in order to obtain something. Cost may be the same as price, but it is often not.
For instance, if you buy a piece of equipment, you may pay a certain price, but before you use it you have to spend more money to have it delivered and installed. This means that costs can be additive.
That is, the installed cost is the total of the price plus deliver cost, plus installation cost.
There are many different kinds of cost of course, - total cost, marginal cost, direct cost, out of pocket cost and so on.
The purpose for which cost is to be used determines the correct cost to us.
Value: is what something is worth to something and an article can be valued in three different ways.
It can be valued as “replacement value”, which is what it would cost to replace, it can be valued as “sales value”, which is what someone is willing to pay for it, it can be valued as a “utility value”, which is what something is worth under a particular set of circumstances.