Are prices determined by cost of production or cost of production determined by prices?

Question

give me details answer with examples,

Answer 1

Prices are determined in rational economies by the ability of it's citizen to pay. By regulating so or creating processes that culminate in such a state a country preserves the purchasing power of it's citizen and welfare. Income per se according to Milton Freidman (no more) is determined by one need to transact spending and need to have transient spending and trasinet spending stretches out ones regular income on a price curve. So cost of production will be low enough to accomodate welfare income and price will be in that limit. Beyond this it can get complicated with other factors like input price controls stipulated by Paretto optimal criterions. So I think it is circulant prices determined by cost of production and cost of production controlled by regulation. Generally price is dependent on Product cost and Process costs. In welfare economies it is marginal pricing so you cannot markup and you will have to make profit if needed based on high sales turn over. This is how regulation of environment works by creating antitrust policies where manufacturers work competitively to be more efficient meaning less production cost and large volume sales.

Answer 2

Neither. In the short run they are independent. In the long run they are interrelated.

Price is NOT determined by cost of production (except in the case of some rip-off government contracts!) . It's determined by supply and demand. That's why businesses often lose money.

Cost of production is not determined by price. A supplier will charge as much as the market will bear -- or a little less to gain market share ... even if production costs are very low. Prices can rapidly fluctuate greatly due to supply and demand. A business cannot turn a knob and suddenly reduce or increase production costs accordingly.

But in the long run they related. You won't continue selling products at a loss forever -- you figure out a cheaper way to make it, or exit the market, or you go out of business. So price influences production costs in the long run, which is why many products that some people might want just are not made.

Also, for certain markets, if there is healthy competition and only "normal' profits will prevail, costs will eventually determine price, as the industry suppliers will settle on a price that gives everyone a normal profit. This is typical of commodity markets.

Answer 3

Prices are determined by a lot of factors. Cost of Production, Transportation, Cost of Labour, Cost of the Machinery acquried etc etc. And other extras like depends on how much the company or the businessperson wants profit.

Answer 4

Prices are determined by what the market will pay for them. If they cost more than what people are prepared to pay, they will remain on the shelf for a long time.

Companies will choose not to produce things if they cannot sell them at a good price.

Answer 5

Prices are determined by cost of production.
Cost of production includes all financial cost (raw material plus entrepreneurial effort). It also includes Real cost and Opportunity cost.

Answer 6

Prices are set according to different levels of greediness .
There is , on the other hand , an almost general consideration of the importance of balance in the system so that the production' workers don' t just die out of starvation .

Answer 7

production determined by prices

Answer 8

depending of reqerment both will done