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Confusion between prices and costs of production

Price is commonly confused with the notion of cost of production, as in “I paid a high cost for buying my new plasma television”; but technically these are different concepts. Price is what a buyer pays to acquire products from a seller. Cost of production concerns the seller’s investment (e.g., manufacturing expense) in the product being exchanged with a buyer. For marketing organizations seeking to make a profit, the hope is that price will exceed the cost of production so that the organization can see financial gain from the transaction.

Finally, while pricing is a topic central to a company’s profitability, pricing decisions are not limited to for-profit companies. The behaviour of non-profit organizations, such as charities, educational institutions and industry trade groups, also involves setting prices. For instance, charities seeking to raise money may set different “target” levels for donations that reward donors with increases in status (e.g., name in the newsletter), gifts or other benefits; likewise educational and cultural nonprofits often price seats for events in theatres, auditoriums and stadiums. Furthermore, while nonprofit organizations may not earn a “profit”, by definition, it is the case that many nonprofits may desire to maximize net revenue total revenue less total cost for various programs and activities, such as selling seats to theatrical and cultural performances.

For further information consider reading Computer Cleaning Prices

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