Definition
Inthedailyapplicationsofmodernsociety,Pricegenerallyreferstothepriceorpaymentthatthebuyerneedstopaywhenmakingatransaction.
Accordingtothestrictdefinitionofeconomics,priceishowmuchmoneyisneededperunitofcommodityvolumewhenacommodityisexchangedwithacurrency.Inotherwords,thepriceistheunitvalue(unitprice).Priceistheformoftransformationobtainedbytheexchangevalueofcommoditiesinthecirculationprocess.Itisavaluefigureestablishedforcommodities,servicesandassetsintheformofcurrency.
Inmicroeconomics,intheprocessofreallocatingresourcesbetweendemandandsuppliers,priceisoneoftheimportantvariables.
Thechangesindemandandsupplyaretheinfluencingfactorsofpricechangesandarethebasisforpriceformation.Thepositivecorrelationbetweenpriceanddemandandthenegativecorrelationbetweensupplyandquantity.
Undercertainconditions,commoditypricesandlaborproductivityarenegativelycorrelated.
Function
Scalingfunction
Itisthemetricmarkthatpricehastoexpressthevalueofgoods.Undertheconditionsofcommodityeconomy,currencyisthemanifestationofcommodityvalue.Theroleofcurrency'svaluescaleisrealizedbymeansofprice.
Regulatoryfunction
Itisthefunctionofadjustingeconomicrelationsandeconomicactivitiesthatpricehas.Whenthepriceislow,theproducer'sunprofitableproductionofgoodswillgenerallyreducetheproductionofgoods;whenthepriceishigher,theproducer'sproductionofgoodscanobtainmoreprofitsandgenerallyincreasetheproductionofgoods.
Informationfunction
Thatis,pricechangescanconveymarketinformationtopeople,reflectchangesinsupplyanddemand,andguideenterprisestomakeproductionandbusinessdecisions.Theinformationfunctionofpriceisformedintheprocessofcommodityexchangeandistheresultofthecombinedeffectofmanyfactorsinthemarket.
Thefunctionoftableprice
isthefunctionofpriceperformanceofcommodityvalue.Thefunctionoftablepriceisareflectionofthenatureofprice.Itexpressesthesocialvaluecontainedincommoditiesintheformofcurrency,sothattheexchangebehaviorcanberealizedsmoothly,anditalsoprovidesandtransmitsinformationtomarketentities.Themoredevelopedthecommodityexchangeandmarketeconomy,themorefullythefunctionofpricecanbefullymanifested,andthemoreimportantitcanbe.
Accountingfunction
referstothefunctionofaccounting,comparingandanalyzingthelaborinputofenterprisesanddepartmentsincommodityproductionandtheentirenationaleconomythroughprice.Itisbasedonthepricingfunctionofprices.Weknowthatspecificlaborandtheusevalueofdifferentcommoditiescannotbeintegratedandcannotbecompared.Thefunctionofpriceaccountingnotonlycreatesthepossibilityforenterprisestocalculatecostsandcalculateprofitsandlosses,butalsoprovidescalculationtoolsfortherationaldistributionofsociallaboramongdifferentindustrialsectorsanddifferentproducts.
Distributionfunction
referstoitsfunctionofredistributingnationalincome,whichisderivedfromthefunctionofpricingandadjustmentofprices.Theredistributionofnationalincomecanbeachievedthroughtaxation,insurance,nationalbudgets,etc.,aswellasthroughtheeconomicleverofprice.Whenthepricerealizestheadjustmentfunction,ithasalsoassumedtheredistributionfunctionamongthenationaleconomicincomeenterprisesanddepartments.
Role
Theroleofpriceistheexpressionofthelawofcommodityexchange,theeffectontheoperationofthemarketeconomywhenthepricerealizesitsownfunction,andtheexternalizationofthebasicfunctionofprice.Inamarketeconomy,themainfunctionsofpriceare:
1.Priceisanindicatorofchangesincommoditysupplyanddemand.
Withthehelpofprice,theproductionandoperationdecisionsofenterprisescanbecontinuouslyadjusted.Adjustthedirectionofresourceallocationandpromotethebalancebetweentotalsocialsupplyandtotalsocialdemand.Inthemarket,withthehelpofprice,theinformationofmarketsupplyanddemandcanbedirectlytransmittedtoenterprises,andeachenterpriseorganizesproductionandoperationaccordingtomarketpricesignals.Atthesametime,thelevelofpricedeterminesthedegreeofvaluerealizationandisanimportantindicatorofthestatusofcommoditysalesonthemarket.
2.Thepriceleveliscloselyrelatedtothechangesinmarketdemand.
Generallyspeaking,whentheconsumptionleveliscertain,thehigherthepriceofacertaincommodityinthemarket,Thesmallerthedemandforthiscommodity;conversely,thelowerthecommodityprice,thegreatertheconsumerdemandforit.Andwhenthepriceofthiskindofcommodityinthemarketistoohigh,consumersmayalsomakeadecisiontobuylessornottobuythiskindofcommodity,ortopurchaseothercommoditiestoreplacethiskindofcommodity.Therefore,changesinthepricelevelplayaroleinchangingconsumerdemand,demanddirection,anddemandstructure.
3.Priceisanimportantmeanstorealizenationalmacro-control.
Thesignalsystemofsupplyanddemandchangesshownbypriceprovidesinformationfornationalmacro-control.Generallyspeaking,whenthepricechangeofacertaincommodityindicatesthatthereisagapinthiscommodity,thecountrycanuseeconomicleverssuchasinterestrates,wages,andtaxestoencourageandinducetheincreaseordecreaseoftheproductionscaleofthiscommodity,therebyadjustingthecommodity.Thebalanceofsupplyanddemand.Pricesalsoprovideinformationforthestatetoadjustandcontroltheproductionofcommoditiesthatcannotbalancesupplyanddemandbyrelyingonmarketforcesalone,sothatthestatecanmoreaccuratelyinterveneinmarketeconomicactivities,andtoacertainextentavoideconomicoperationsbroughtaboutbymarketspontaneousadjustments.Theinstabilityoftheeconomy,orthereductionofunstablefactorsintheeconomicoperationprocess,makesthemarketsupplyanddemandtendtobegenerallybalanced.
Index
Theconsumerpriceindex(Englishname:consumerpriceindexabbreviation:CPI)referstoanindexthatmeasuresthepurchasepriceofaselectedbasketofconsumergoods.Whencalculatingtheindex,theweightofeachcommodityisdeterminedbasedontheshareofthecommodityinthelivingexpenditureofurbanconsumersfrom1982to1984.Itisanindicatorofpricechangesthatreflectsthestatisticsofthepricesofproductsandservicesrelatedtothelivesofresidents,andisusuallyusedasanimportantindicatorforobservingthelevelofinflation.Iftheconsumerpriceindexrisestoomuch,itindicatesthatinflationhasbecomeafactorofeconomicinstability,andthecentralbankwillhavetheriskoftighteningmonetaryandfiscalpolicies,resultinginuncertaineconomicprospects.Therefore,theexcessiveriseoftheindexisoftennotwelcomedbythemarket.Forexample,inthepast12months,theconsumerpriceindexhasrisenby2.3%,whichmeansthatthecostoflivinghasrisenbyanaverageof2.3%comparedto12monthsago.Whenthecostoflivingincreases,thevalueofyourmoneydecreases.Inotherwords,a100yuannotereceivedayearagocanonlybuygoodsandservicesworth97.70yuan.Generallyspeaking,whenCPI>3%increase,itiscalledINFLATION,whichmeansinflation;whenCPI>5%,itiscalledSERIOUSINFLATION,whichmeanssevereinflation.
Theconsumerpriceindexisanindicatorofpricechangesthatreflectsthepricesofproductsandservicesrelatedtothelivesofresidents.Itisusuallyusedasanimportantindicatortoobservethelevelofinflation.TheupgradedversionoftheCPIiswidelyusedinternationally.Index(retailedpriceindexabbreviation:RPI).InChinaitiscalledtheconsumerpriceindex.Theconsumerpriceindexcanbecompiledaccordingtotheurbanandruralconsumerpriceindexandtheruralconsumerpriceindexrespectively,andcanalsobecompiledaccordingtothewholesocietyinChina'sconsumerpriceindex.TheConsumerPriceIndextracksthecostoflivingforacertainperiodoftimetocalculateinflation.Iftheconsumerpriceindexrisestoomuch,itindicatesthatinflationhasbecomeafactorofeconomicinstability,andthecentralbankwillrisktighteningmonetaryandfiscalpolicies,resultinginuncertaineconomicprospects.Therefore,theexcessiveriseoftheindexisoftennotwelcomedbythemarket.
Distribution
Priceisatoolofnationalincomedistributionandredistribution.Pricechangesandfiscalrevenueandexpenditureaffecteachother.Undersocialistconditions,therelationshipbetweenthetwoismainlyreflectedin:
Financialrevenueandexpenditurebalanceisthebasisformaintainingthestabilityoftheoverallpricelevel
Thebalanceofincomeandexpenditureshowsthatthecentralizedsourceoffundsthatthestatecontrolsarecompatiblewiththedemandforfunds,theproductsthatthestatecontrolswiththedemandforproducts,andcurrencycirculationiscompatiblewithcommoditycirculation,sothattheentiresocialeconomycanoperatenormallyandthecurrencyvalueandpricecanbemaintained.Basicallystable.Thestabilityofmarketpricesisareflectionofthecomprehensivebalanceoffiscalrevenueandexpenditure,creditrevenueandexpenditure,andmaterialsupplyanddemand.Therootcauseofinflationcausedbyfiscaldeficitsistheuseofbankstoincreaseinvoicestomakeupforthecountry’sfiscaldeficits.Asaresult,thecreditbalanceisunbalancedandforcedtoissuefiscalcurrency,sothattoomuchcurrencyincirculationcausesthecurrencyvaluetofallandpricestorise.
Therelationshipbetweenfinanceandpricescanalsobelooser.Whenthecountry’sfiscalrevenuesandexpendituresareunbalancedandlargedeficitsappear,thegovernmentcantakeloansfromresidents(thatis,issuingpublicbonds)tomakeupforthefiscaldeficit,withoutcausingmarketpricestorise.However,borrowingfromresidentsbeyondthelimitcanalsocauseinflation.
Stateadjustmentstopriceswillaffectfiscalrevenuesandexpenditures
Generallyspeaking,raisingpricescanincreasefiscalrevenues.GovernmentsinsomecountriesoftenusethismethodtoMakeupthefiscaldeficit.Butsometimestheoppositehappens.Theextentofpricechangesdependsontheaffordabilityofthepeople,thedigestionandabsorptioncapacityofenterprises,andtheaffordabilityofstatefinances.Althoughpricechangescannotdirectlyincreaseordecreasesocialwealth,theycantransfernetincomeamongvarioussectorsandchangethedistributionratioofnationalincome.In1979and1980,Chinasubstantiallyincreasedthepurchasepriceofagriculturalproducts,whichsignificantlyincreasedtheincomeoffarmersandstimulatedthedevelopmentofagriculturalproduction.However,duetothefactthatmostoftheincreaseinnationalincomehasbeengiventofarmers,thestate'sfiscalrevenuehasgrownslowly,anditisdifficulttomeettheneedsofallpartiestoincreaseexpenditure.Asaresult,arelativelylargefiscaldeficithasoccurredintheabovetwoyears.
Financialgrantspricesubsidiescanmaintainthestabilityofretailprices
ThestatesometimesstipulatesthatthepriceofcertainindustrialproductsislowerthanitsproductioncostandstipulatescertainagriculturalandsidelineproductsThesalespriceofstate-ownedcommerceislowerthanthepricewhenpurchasingfromfarmers,andtheresultingpolicylossesaresubsidizedbythestatefinances.Chinaraisedthepricesofitsgrainpurchaseprogramseveraltimesfrom1979to1990,andthestabilityofgrainsalespriceswascompletelymaintainedbyfinancialsubsidies.
Theory
Pricetheorymainlyincludesfourschoolsoflaborvaluetheory,marginalutilityvaluetheory,supply-demandequilibriumschool,andSraffapricetheoryschool.
ScholarsofthelaboraxiologyschoolsuchasMagnus,Petty,Muller,andMarxcanalsobeincludedinthisschool.Thisschoolbelievesthattheprice(value)ofcommoditiesisdeterminedbythecostofproducingcommodities(suchasproductioncosts,labor,sociallynecessarylabor,etc.).
ThemainscholarsoftheschoolofmarginalutilityincludeMenger,Jevons,Walras,Wieselandsoon.Thisschoolbelievesthatcommoditypricesaredeterminedbytheirutility(marginalutility).
ThemainrepresentativesoftheschoolofequilibriumofsupplyanddemandarescholarssuchasMarshall.Thisschoolbelievesthatcommoditypricesaredeterminedbytheequilibriumpointbetweenthesupplyanddemandofcommodities.Marshall'sequilibriumpricetheoryhasbecomethecurrentmainstreampricedeterminationtheory.
TherepresentativefigureofSraffa'spriceschoolisSraffa.Sraffabelievesthatcommoditypricesaredeterminedbytheproductioninput-outputrelationshipandthelabor-capitaldistributionrelationship.
Elasticity
Theso-calledpriceelasticityreferstotheelasticityofthequantitydemandedtotheprice,whichreferstothesensitivityofthecorrespondingchangeinthequantityofdemandforacertainproductwhenthepriceofthatproductchanges.Thepriceelasticityanalysisistoapplytheprincipleofelasticitytoanalyze,calculate,predict,andmakedecisionsonthedegreeofresponseofproductdemandtopricechanges.
Priceelasticityindicatesthedependenceofsupplyanddemandonpricechanges,reflectingthecorrespondingrateofchangeofsupplyanddemandcausedbypricechanges,thatis,thesensitivityofsupplyanddemandtopriceinformation,alsoknownasthepriceelasticityofsupplyanddemand.Factorssuchasthepriceoftheproductitself,theincomeofconsumers,thepriceofsubstitutes,andthepreferencesofconsumerswillallaffectthedemandforproductconsumption.Priceelasticityreferstothechangeinthequantityofdemandcausedbythechangeinthepriceofthecommoditywhenthesefactorsremainunchanged
.Inthecaseofelasticdemand,apricecutwillcauseacorrespondingincreaseinthepurchasevolume,therebyincreasingtheconsumer'smonetaryexpenditureforthiscommodity;conversely,anincreaseinpricewillreducetheconsumer'smonetaryexpenditureforthiscommodity.Whentheelasticityofdemandisequalto1,thepricereductionwillnotcausechangesinconsumers'monetaryexpendituresforthiscommodity.
Priceelasticitydependsonfactorssuchasthenumberofsubstitutesforthecommodityandthedegreeofcorrelation(i.e.substitutability),theimportanceofthecommodityinthebuyer’sbudget,andtheuseofthecommodity.Priceelasticityismainlyusedincorporatedecision-makingandgovernmenteconomicdecision-making.
Priceelasticity(priceelasticity)referstotheratiobetweenthepercentageofacertainproduct'ssalesvolumechangeanditspricechangepercentage,andisasensitiveindextomeasurethequantitychangecausedbythepricechange.Whentheelasticitycoefficientis1,theincreaseinsalesvolumeandthedecreaseinpriceareoffset.Whentheelasticitybetween0and1meansthatthepriceincreasewillalsoincreasetheincome,andthepricedecreasewillcausetheincometodecrease.Wesaythatthedemandforthiskindofgoodsisrelativelyinelastic,orprice-insensitive.Theelasticityofdemandformostfoodsislow,whiletheelasticityofdemandformostluxurygoods,suchasperfumesandhigh-endclothing,isrelativelyhigh.
Thecalculationformulaofelasticitycoefficient:ε=△Q/△P=P×dQ/Q×dP