Prices – Definition and meaning
The term ‘Prices’ refers to how much something is purchased, sold or offered for sale for.
It is a component of a transaction or exchange that takes place between a buyer and a seller, and refers to what needs to be given up by the buyer in order to obtain something from the seller.
In today’s modern economies, prices are typically expressed in units of dollars, pounds, euros or another currency. Commodities, for example, are quoted as currency per unit weight, such as dollars per kilogram.
Goods and services could be quoted in a barter-like exchange – to buy a fridge you must give up one camel – this today is extremely rare.
Sometimes prices are quoted in terms of loyalty points, vouchers, air miles, or trading stamps. In many prisons across the world, the prices of goods and services are quoted in cigarettes.
According to Dictionary.Cambridge.org, price is:
“1. The amount of money for which something is sold. 2. The unpleasant results that you must accept or experience for getting or doing something: ‘Perhaps being unpopular is the price of success.’ 3. To say what the price of something is: ‘The car is priced at $28,000.’”
Price – buyer’s and seller’s view
The word has different underlying meanings for different entities in an exchange of goods or services.
– Buyer’s View: prices represent what needs to be given up to receive goods or services. In the vast majority of cases today, what needs to be given up is money.
When purchasing a new computer system, in order to learn how to properly use it, the buyer must also give up time.
– Seller’s View: prices represent the revenue received when goods or services are sold. It is a crucial factor when calculating profit. For marketing professionals, it is a tool used in advertising campaigns to attract or lure potential purchasers.
According to INNER CORE CONSULTING: “If you’re pouring money into marketing but nothing’s happening, you need to evaluate your marketing mix. The fundamental five Ps of marketing are the best place to start looking for gaps in your small business marketing plan.” The 5 Ps in marketing are price, profit, promotion, place and product.
Price vs. cost
In the world of business, costs are the expenses that a commercial enterprise incurs when it brings products or services to market, prices are how much consumers pay for those goods or services.
As far as a company is concerned, the difference between the costs and prices of the products it sells are the profits.
If it cost $50 dollars to bring a product to market, and its price is $100 – the business sells it for $100 dollars to consumers – the company makes a $50 profit.
Bid vs. ask price
In many markets, such as the buying and selling of precious metals, traders need to know what ‘bid’ and ‘ask’ mean.
– Bid Price: this is how much a gold dealer, for example, is willing to buy the metal for.
– Ask Price: this is how much a gold dealer is willing to sell the metal for.
The bid-ask-spread is the difference between the bid and ask prices – the spread is the broker’s profit.
Warren Edward Buffett is an American multibillionaire businessman, investor, and philanthropist. According to Forbes magazine (April 23, 2017), he is he second-richest person in the world, with a real time net worth of $73.4 billion. Known as the ‘Oracle of Omaha’, Buffett’s company – Berkshire Hathaway – owns over sixty companies, including Duracell, Dairy Queen and Geico. He first filed taxes when he was thirteen, and first bought stock at the age of eleven. (Image: adapted from twitter.com/WarrenBuffett)
Etymology of ‘price’
Etymology is the study of the origins of words and how they evolved over time. A person who specializes in etymology is an etymologist.
The term ‘price’ as a noun in the English language dates back to 1200 with the word ‘Pris’, which meant ‘value, praise, worth’ – and later ‘cost, prize, recompense’. It came from Old French ‘Pris’, meaning ‘reward, wages, value’ as well as ‘praise, fame, honor, prize’.
The Modern French word ‘Prix’ came from Late Latin ‘Precium’ which originated from Latin ‘Pretium’. The Latin term came from Sanskrip ‘Aprata’, meaning ‘gratuitiously, without recompense’.
As from 1766, in Britain the word as a verb emerged with the meaning to ‘set/put a price on someone – offer a reward for capture’.
Oscar Fingal O’Flahertie Wills Wilde (1854-1900) was an Irish playwright, poet, novelist, and essayist. In the early 1890s, he was one of London’s most popular playwrights. (Image: adapted from tvtropes.org/pmwiki)
The word ‘price’ in other languages: precio (Spanish), prix (French), preço (Portuguese), prezzo (Italian), Preis (German), цена (Russian), cena (Polish, Czech), Preț (Romanian), prijs (Dutch), pris (Swedish, Norwegian, Danish), τιμή (Greek), السعر (Arabic), 価格 (Japanese), 价钱 (Chinese), मूल्य (Hindi), harga (Indonesian, Malay), মূল্য (Bengali), કિંમત (Gujarati), قیمت (Persian), bei (Swahili), and intengo (Zulu).