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Difference Between Price, Cost And Value

what is the difference between price, cost and value

Difference Between Price, Cost And Value

Price, value and Cost are the most frequent words we use to hear now and then from our friends or family members. Be it a product, service, property, investment etc. this three are the most common words used to describe a particular point. 

But, do you know that all this three values are not at all same???

Do you know that you can't use any word at anytime???

All this three terms are totally different and are applicable differently at different time and for different product.

Today, in this article I will try to explain all this three terms and there differences in a very easy language possible.

Whenever we went to the market to purchase anything we see that there are millions of products with different shape, size, color, features, brands etc. from which we have to select an item. While going through a product first question comes in our mind is - What is the price of this product? then, What would be the cost of this product? then, What is its value for me? There are slight difference between all these three terms - price, cost and value which are very much important to know. So let's have a look on it.
First of all let's understand this three terms can be very basically and simply understood as,

Price: Price is the money paid to the seller.

Cost: Cost is the amount of inputs involved in the manufacturing of  a product.
Value: Value is what product or service pay to the customer.

Now, let's compare all these three terms on the basis of different criteria as follows:

a) Meaning:

Price is the amount paid to purchase a product.
Cost is the amount spend to manufacture a product.
Value is the utility of good or services.

b) Ascertainment:

Price is ascertained from consumer's perspective.
Cost is ascertained from producer's perspective.
Value is ascertained from user's perspective.

c) Estimation:

Price is estimated through policy.
Cost is estimated through fact.
Value is estimated through opinion.

d) Impact of variations in market:

Prices of products increases or decreases.
Cost of input rise or fall.
Prices remains unchanged.

e) Money:

Price can be calculated in terms of money.
Cost can also be calculated in monetary terms.
Value cannot be calculated in terms of money.

Key Differences Between Price, Cost And Value:

  1. Price is what we pay for goods or services; Cost is the amount of inputs incurred in producing a product by a company and Value is what goods or services pay us i.e. worth.
  2. Price is calculated in numerical terms, Cost is also calculated in numerical terms, but Value can never be calculated in numbers.
  3. Price is same for all the customers; Cost is also same for all the customers while the Value varies from customer to customer.
  4. Price is estimated through the price policy; cost is assessed on actual expenditure incurred on manufacturing a particular product, but the estimation of value is based on customer’s opinion.
  5. The Ups and downs in the market will affect the price and the cost of any product while value remains unaffected.
  6. The ascertainment of price is done with the view of the consumer; the cost is ascertained from producer’s view whereas the ascertainment of value is done from the user’s point of view. 
Examples For Better Understanding And Differentiation:

Price Vs Cost

When we purchase a car, we pay the amount for it. The amount paid by us as a customer is its Price while the amount invested by its company for manufacturing it is its Cost. The price of a product is always more than its price cost because of the addition of the profit margin of the manufacturer and dealer.

Cost Vs Value

If you are a pen manufacturer who manufactures thousand of pens everyday then the cost of its production is your companies point of concern as you can manufacture more pens at lowest prices. But, the value of the pen is decided by your customer who is the final buyer of your pen which he will use on daily basis. If he thinks that the value of your pen is worth buying then he will purchase it.

Value Vs Price

Here, lets take Water and Diamond for comparison as examples. Without water we can't survive, still its price is very low. While diamond is just a materialistic thing which is ornamented for our bodily and nobody is going to die without it still, its price is very high. Reason behind this is, value of water is very high for us, it is available at low price while diamond is priced very high but the value of it is very low for us.

I hope that you are clear with the main and basic difference between these three important terms which we use frequently in our life. If you have other examples in your mind then let us know by commenting below.

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