Prices

Prices are the monetary values assigned to goods and services in exchange markets. They serve as signals that coordinate production and consumption by reflecting relative scarcity and willingness to pay.

In most economies, prices are determined where supply and demand intersect. The price rises when the quantity demanded at a given price exceeds the quantity supplied, and falls when the opposite occurs. Other factors shaping prices include production costs, technology, expectations, taxes, subsidies, input prices, and the level of competition.

Pricing can occur through various mechanisms: freely negotiated bargains, markets with competitive bidding, or posted prices set by sellers. Some markets employ dynamic pricing that changes with time, demand, or inventory. Price discrimination and bundling are strategies that adjust price across customers or products.

Prices form the basis for price elasticity of demand, cost of capital, and investment decisions. Persistent price changes contribute to inflation or deflation and are tracked by price indices such as the consumer price index and the producer price index.

Governments may intervene through price controls, such as ceilings or floors, which can create shortages or surpluses, or through subsidies and taxes that alter the effective price faced by buyers and sellers.

Prices have social and economic implications, affecting affordability, income distribution, and access to essential goods, and they reflect broader constraints in markets, technology, and policy.