Definition of Price

Price is the exchange value of a good or service in terms of money. If there were no money, we could have exchange, but we would not have price. In some underdeveloped areas of the world, and in times of depressions, exchange is sometimes effected by exchanging one economic good for another. There is no uniformity of value when we exchange one commodity for another.
One of the chief characteristics of money is that it is a universally accepted medium of exchange, exchangeable for any commodity anywhere. Exchange in terms of goods (apples, and shoes, for example) would have to depend upon one party wanting apples and the other party wanting a pair of shoes. With money, the buyer can use a universally accepted medium of exchange for any other commodity or service desired. The exchange value is called price.
Price is an important element in meeting consumer needs. Price and pricing policies are among the most important problems that confront management. The value, and the utility of a product have to be set against the price of it. Price is always an important consideration to the buyer and to the seller. Price can often spell success or disaster.
Price has figured prominently in economics for hundreds of years, but it did not always have the importance it has today. For many centuries, exchange was limited. Most people of the world were busy staving off hunger, and cold. But as the wealth of the world increased, especially after the discovery of America which filled European treasuries with hard money (gold and silver), national and international exchange was greatly facilitated. A commonly accepted medium of exchange was essential. The importance of money grew. More and more people had money. And what they could do with it-in terms of the price they paid for what they wanted-became the very heart of exchange of a money economy.
But it was reserved for the twentieth century to liberate millions of families from the drudgery of making a living. Today, we have a large and growing consumer buying power. At this point in the latter portion of the twentieth century, the effective buying power of the people in the United States approaches $400 billion. In Canada it is nearing $30 billion. The annual rate of growth in consumer income in the 1950s was 6.6 per cent in the United States and 8.6 per cent in Canada. And consumers spend from 93 to 97 cents out of every dollar of income. It is very important, therefore, to determine the basis of price, which influences consumers to spend as much as they do.
But the purpose of putting a price on an item is not simply to effect its exchange. Price has to determine the value of the item to the consumer (the price at which it will sell on the market). It has to recover the maker's costs. And, ideally, it has to establish a fair value that will result in repeated exchanges