Market price

The market price (according to the legislation of the Russian Federation on taxes) is the price of a commodity that has developed in conditions of free interaction of supply and demand in the market of homogeneous or identical goods in economically comparable conditions.

The market price is determined in accordance with the Tax Code of the Russian Federation. When it is formed, allowance is made for allowances or discounts caused by the loss of merchantable qualities or other consumer properties, seasonal fluctuations in demand, marketing policy, the expiry of shelf life, the sale of samples or experimental models of goods, etc.

When determining prices under market conditions, transactions between persons who are not interdependent are taken into account. The price determination is influenced by information about the transactions made with the same goods with identical goods (the volume of goods supplied, the terms of delivery, payment terms, other factors that may influence the price increase or decrease are taken into account.

Functions of the market price:

• Orientating (gives information about a group of products);
• Distributive (balances the incomes of economic participants);
• Stimulating (contributes to the development of more rational ways of producing and selling goods).

The market price is established in three periods:

1. In conditions of instant equilibrium, when the price depends solely on demand;
2. In conditions of short-term equilibrium, when demand can arbitrarily change in any direction;
3. In the conditions of long-term equilibrium, when the supply adapts to demand, resulting in an equilibrium market price.

If the market is such a situation, when the supply is less than the demand for the goods, then there is a deficit on it. Otherwise, there is an excess of goods on the market (a consequence of overproduction). A balanced (equilibrium) price allows you to regulate the quantity of goods on the market and achieve the marginal profitability of economic activity.

The market price is analyzed when comparing transactions between interdependent and independent persons. In this case, the comparison can be conducted only for comparable transactions (made in the same financial and commercial terms).

The market price can develop only in the market of perfect competition. This is impossible in the conditions of monopoly of individual sellers, price discrimination.

The formation of such a price is influenced by many factors (external and internal to the manufacturer of goods).

In the conditions of the market, the price is formed, first of all, under the influence of the existing demand and supply for goods. Demand is the consumer's desire to purchase goods, supported by financial resources. The more products that enter the market, the lower the price is set for them.

The offer is the quantity of goods that sellers are ready to offer to the buyer in certain conditions. If there is a decrease in demand due to an increase in the prices of goods, then the offer, on the contrary, increases, which demonstrates the contradictory interest in the price of goods for sellers and buyers. For example, the market price of a bond (as opposed to a nominal one) is established only under the influence of demand.

A feature of the free market is that at a certain level of supply of products, he himself strives for equilibrium. When the correspondence between supply and demand is achieved, a market (fair) price is spontaneously formed. But the equilibrium is not static, it varies under the influence of various factors.

The level of market prices is affected by the elasticity - an indicator of the change in demand for goods, which occurs when the price of it changes. No less important factor is competition, forcing producers to change prices for the goods they offer. The behavior of consumers (the reaction of buyers of different segments to existing prices on the market) is also capable of leading to a change in prices. In addition to all the above, it is necessary to take into account such an important factor as state regulation of prices.