In a capitalist economy, probably any commodity has a price. It can be formed on the basis of a wide variety of mechanisms and patterns. Moreover, a unified approach to determining the nature of prices among world researchers is quite difficult to detect. There are a large number of classification criteria for the corresponding indicator. Which of them are common in Russia?
What is price and what are its functions
Price, in accordance with a common definition, is a way of expressing the value of a product in cash. It is called upon to fulfill a variety of functions. Among them: accounting, stimulation, as well as distribution.
Regarding the accounting function, its implementation assumes that with the help of the price the costs of production and sale of products are fixed. Stimulation is designed to create positive conditions for increasing the efficiency of production of goods, improving their quality, and improving the manufacturability of production processes. The distribution function involves the inclusion in the price of various taxes, excises and fees, which are then transferred by the seller to the budget.
Some researchers also highlight the social function of price. It assumes, on the one hand, that the population of a country (region or municipality) will be able to purchase goods at an economically reasonable cost, on the other hand, that an enterprise producing an appropriate type of product can be profitable and thereby support jobs. As an option - for residents of the same city or region.
Let us now consider how price classification can be implemented.
Features of price classification
There are a large number of grounds and signs by which the corresponding indicators of the expression of the value of the goods can be assigned to one or another category. So, among the common methods is the classification of prices based on the scope of commodity circulation. For this reason, indicators of the expression of the value of the goods can be represented in the form:
- wholesale prices (as an option, for industrial products);
- purchasing indicators of value in agriculture;
- transport tariffs;
- retail prices;
- consumer tariffs (for example, for the provision of utilities);
- prices involved in determining foreign trade priorities.
Some researchers tend to supplement this scheme with a classification based on the specifics of the stages of commodity circulation.
Commodity circulation
So, there are three main stages of this process:
- the movement of goods from the enterprise that produced it to wholesale organizations;
- moving products from wholesalers to retail businesses;
- sale of goods by retail outlets to the end consumer.
This scheme forms another basis for the classification of prices - the division of the relevant indicators into wholesale and retail. A little later we will consider their specifics in more detail.
Regarding wholesale prices, it can be noted that they are sufficiently close to the purchase prices that apply in the field of agriculture. They are set by private farmers or agricultural firms for the end consumer or, for example, intermediary structures - retail outlets, chains, kiosks, etc.
There is an economic criterion within which classification and price structure are carried out. So, the researchers base the attribution of indicators to one or another category, based on the degree of state intervention in pricing. If we adhere to this methodology, then the signs of price classification will be expressed in the degree of their compliance with the laws of supply and demand. Thus, indicators can be:
- free (that is, pricing is carried out only on the basis of patterns of supply and demand);
- regulated (the state sometimes intervenes in appropriate mechanisms, most often it concerns sectors strategically significant for the national economy);
- fixed (the authorities clearly fix prices for specific types of products).
At the same time, the economies of even the most developed countries, regarded as reference capitalist countries, may have second and third mechanisms. Similarly, in state formations with strong government interference in the economy: for example, in China there is room for free pricing.
Trading Mechanisms
Price classification may be carried out for other reasons. So, the relevant indicators of the value of the goods can be attributed to one or another category of the trading sector. If we talk about this segment of commercial relations, then prices can be: auction, exchange or contractual. The first type of indicators can be characterized by significant dissimilarity when compared with market figures. This traces the well-known specificity of auctions. Exchange rates may be relatively close to the market price. In commercial relations contractual criteria are common. In accordance with them, the price of goods that one enterprise must deliver to another under the contract can be determined.
Sometimes price classification by geography is used. So, the relevant indicators of the cost of goods can be national, regional or local. But in the Russian economy, this approach to price classification is not very common.
Let us examine the specifics of some types of prices, which are probably the most prevalent in world economies. The types of prices and their classification, adopted in expert communities around the world, may vary, but almost always there is such a category in the corresponding methods as wholesale indicators of the value of the goods. We will study them in more detail.
Wholesale Price Features
Wholesale price is an indicator that characterizes the products of enterprises operating most often in various industries, in terms of sales and purchases when interacting with counterparties. The form of ownership in the framework of the relevant mechanisms most often does not matter. There are a number of additional reasons on which classification of prices belonging to the category of wholesale can be carried out. So, allocate:
- selling prices;
- industrial indicators of cost.
The specificity of selling prices is that they are set by the manufacturer of a particular product with the aim of selling to sales businesses. In some cases, the corresponding indicator may be determined in the form of a transfer price. This is possible if there is interaction between the structures of one legal entity (for example, several joint-stock companies within the holding). Often the transfer price is fixed in contracts, the subject of which is a commercial loan.
As for industrial indicators of value, they characterize goods that are transferred generally through the same channels as at wholesale prices, but including VAT and other fees and margins (usually formed through intermediary services). Thus, the difference between the two noted varieties of wholesale indicators is noticeable, but in general their significant structural proximity is observed.
Some researchers single out wholesale prices into a separate category, which are formed when there is a noticeable impact of exchange factors. It is assumed that the corresponding indicator is formed on the basis of quotations on the stock exchange and is finally set taking into account possible discounts and other preferences of the supplier for the consumer (or, conversely, subject to increase, for example, due to not quite stable relations between businesses).
The functions and price classification adopted in many research communities suggest the allocation of a separate type of retail indicators of the value of goods. We study their features.
Retail Price Features
Retail prices - indicators that characterize the value of goods sold by the enterprise directly to the consumer in the person of a citizen or other organization. Their formation involves the influence of a number of key economic components. Among them are the wholesale price (in some cases corresponding to the purchase price), various taxes and fees (for example, VAT), labor costs. The formation of retail indicators directly depends on the criteria for the profitability of a business, its credit load, and the terms of agreements with investors.
The methodology, which includes the widespread pricing system in Russia and their classification, suggests that retail prices are usually more volatile than wholesale. The fact is that they are more sensitive to the final level of demand, which is not always stable (especially in relation to elite goods, to a lesser extent - for everyday goods). As a rule, retail prices are not fixed in contracts (as wholesale in some cases). Moreover, the corresponding figures can vary significantly in different stores. What is the reason for this? Most often, the difference in the key aspects of the business model that we noted is profitability, costs of credit services, etc.
The price system and their classification, adopted in many states, include the separation into a separate category of indicators that relate to foreign trade. We study their specifics in more detail.
Foreign trade price specifics
Foreign trade prices characterize goods and services supplied by private and state enterprises that are registered in a particular country abroad. They can be installed either due to market factors or as a result of private agreements, in which, as a rule, government agencies take part.
Classification of world prices for a particular type of product, as a rule, is quite universal. For example, with regard to the relevant indicators for oil, modern exporting countries of this type of fuel have adopted a methodology by which the basic cost of goods is calculated on the basis of the Brent brand.
There are a large number of mechanisms within which the considered indicators of the value of goods are formed. Aspects such as the concept and classification of prices, we investigated. It will now be useful to consider the framework under which patterns pricing can be implemented.
Two main mechanisms of price formation can be distinguished: intra-corporate (when an enterprise that produces goods or provides services forms the relevant indicators), and market, when certain figures reflecting the value of goods are formed based on the ratio of supply and demand in a particular segment free market. As a rule, both marked mechanisms are activated simultaneously. Let's consider them in more detail.
Intra-corporate pricing
So, prices can be set, first of all, by the management of the enterprise itself, which produces goods or provides services. Based on what priorities are the relevant indicators identified? The pricing policy of companies producing goods and service providers can be based on such factors as the tasks of company development, the value of production costs, the priorities of owners, investors, etc.
In some cases, the company keeps low prices in order to occupy a larger market niche than competitors, and in this case, the second mechanism for generating indicators of the cost of goods is already connected - the market. We study its specifics in more detail.
Market pricing
Low prices, therefore, can be set by the company, based on objective market factors. So, this is possible if the demand is insufficient (or it decreased, as an option, as a result of the crisis) or the competition in the segment is so great that it has to be maintained through price manipulation.
It is quite acceptable that the relevant indicators will determine the loss-making of the enterprise. In this case, the company may decide to reduce costs (both by saving certain resources, and by improving business processes) or seriously reduce its presence in the market. In some cases, too much competition leads the company to bankruptcy.
