Cost price

“ If we attempt to ascertain the changes in the cost of production of any commodity from the changes in its money price, the conclusion will require to be corrected by the best allowance we can make for the intermediate changes in the cost of the production of money itself. ”

“ The price is a consideration wholly for the vendor, and the value a consideration wholly for the purchaser. Hence it follows that both value and cost enter into a bargain, even when legitimately made. But value goes solely to determine the demand, and is solely cognizable by the purchaser or consumer—by him who receives; while cost (or burden) goes to determine the price, and is solely cognizable by the seller or producer—by him who renders. ”

“ They do so in terms of Price when measured by Money; they do so in the essentials of Value when measured by comparisons of commodities. As a rule, however, Money-prices are fair guides to Commodity values. Commodity values rise and fall according to cost of production, inclusive of delivery; and in so far as Money is stable, the rise and fall in prices is evidence of variations in production cost.
The relative rise and fall in Value, be it measured by prices in Money or otherwise, is so common a phenomenon of Trade that critics might be pardoned for denying a Value level. ”

“ In order to show what natural price is, we add up all the wages that have been paid, and declare that to be the cost and then say that the cost governs the price. Then if we are asked why are wages what they are, we turn the argument backward and say that since the selling price is so and so the wages that can be paid out of it only amount to such and such. ”

“ So with the price level, while the strong-arm method is not only costly and vexatious but futile, the simple regulation of our instrument for measuring prices, the dollar, will accomplish the same result not only without cost and effort but, what is more to the point, with success. ”

“ The cost which requires 25s. is incurred for the sake of fifty quarters alone: the first hundred might have continued forever to be produced at the original cost, and with the benefit, on that quantity, of the whole rise of price caused by the increased demand: no one, therefore, will incur the additional expense for the sake of the additional fifty, unless they alone will pay for the whole of it. ”

“ The chief topic of dispute in respect to the theory of money-value has been concerned with the question as to the ultimate regulating influence. The value of freely produced commodities is—according to economic theory—determined by “cost of production,” or, where the article is produced at different costs, by the cost of production under the most unfavourable circumstances. As demand varies with price, it follows that an adjustment of value takes place through the interaction of cost and demand, the latter indicating the influence of the utility of the commodity on the quantity required. ”

“ Hence the business man's view of the costs is that they determine value. It is true in the sense that the supply of a particular product in any market is at last limited by cost of marginal producers or of marginal portions of supply. But it is not true of all the units of product that costs determine, or equal, market price. There is a margin above costs to the successful enterpriser on a large portion of his output. ”

“ Supply and demand, cost of production, the capitalization theory, the imputation theory—the general laws of the concatenations and interrelations of prices—are quite adequate for the confutation of the quantity theory. They are laws concerned with particular prices, and the price-level is nothing but the average of particular prices. ”

“ The price, which to-day depends on the quantity on hand, acted in advance as a lure to bring that quantity into existence, and among the different articles which men can produce, they are forever singling out for increased production those things which offer the strongest lures—that is, the things that sell for the largest amounts as compared with the cost of making them. The ultimate tendency of all this is a certain adjustment of the relative supplies of different commodities. It is that adjustment which brings all prices to a level determined by cost. ”

“ In the second place, it must be borne in mind that, despite the fluctuations in the prices of commodities, the average price of every commodity, the proportion in which it exchanges for other commodities, is determined by its cost of production. ”

“ In other lines of business, commonly occupied with the production of staple goods, this constituent of cost may perhaps fall below ten per cent of the total. Where the average, for the price of finished goods delivered to the consumers, may lie would be a hazardous guess. ”

“ The price of all goods rose to the extent that the wages affected were an element in their cost, with some exceptions, as in the case of railway services, in which the Government bore any loss. Prices of food which depended to a great extent on the world market prices were not directly affected to any great extent, being paid for by the realization of foreign securities, by the export of gold and by loans, but they nevertheless continued to rise. ”

“ The first three of these items bear directly upon the determination of the representative or marginal producers for price-fixing purposes. The fundamental question in fixing prices that are based on cost, is the determination of what may be called the “marginal cost.” This cost may be explained as follows: it is frequently the case that when the several individual costs for a group of producers are accurately ascertained and are ranged in their order from low to high, there will be a variation among them of 100%, the high cost being double that of the low cost. ”

“ Although price and cost may, in conventional phrasing, be interchangeable without confusion of ideas, the discussion of changing commodity prices and concurrent costs of living necessitates a discriminating use of the terms. As a matter of fact, an increase in the average of prices may be no proof of change in the average cost of living during the same period ”

“ The price paid by the public greatly exceeds the real cost of production. A very large proportion, often the greater part of the cost to the consumer, goes in railway and other rates and in middle-men's profits. ”

“ As no one is willing to lose anything, every seller will consider what his goods have cost him, and the cost of producing or procuring them as the minimum price to be asked for them.630 At the same time, the idea covered by the expression [pg 316] cost of production, although it always embraces whatever disappears from the resources of the producer to enter into production, varies very much according as it is considered from the point of view of the individual's, the nation's or the world's economy. ”

“ Thirdly, and this difficulty is of a more serious nature, the prices of some or many of the articles which occupy an important place in all calculations of the cost of living of the wage earners may change in a different measure, or even in a different direction, from the prices of the other commodities produced within the country. Food prices in particular are apt to respond to different influences than those governing the general price level. ”

“ Because business must figure in these losses as part of the cost of doing business, the price of their products or services must increase accordingly to all the people who avail themselves of these goods or services. ”

“ If, again, I over-estimate the cost to me, and ask a price greater than your estimate of the value to you, there is no bargain, and I have lost the opportunity of earning a price measured by the real cost of the performance, so that the cost of my mistake again falls on me; while, the market being open, and a thorough adjust ment of supply to demand being established, others will make a juster estimate, whose services you will procure and you will suffer no inconvenience. Competition will regulate any disposition on my part to overcharge. ”

“ We have never considered any costs as fixed. Therefore we first reduce the price to a point where we believe more sales will result. Then we go ahead and try to make the price. We do not bother about the costs. The new price forces the costs down. The more usual way is to take the costs and then determine the price, and although that method may be scientific in the narrow sense, it is not scientific in the broad sense, because what earthly use is it to know the cost if it tells you you cannot manufacture at a price at which the article can be sold? ”

“ And finally, let us remember that the current price always stands either above or below the cost of production, according as the sale of a commodity takes place in the favorable or unfavorable period of the industry. ”

“ The enterpriser must first decide what product he will endeavor to secure, and the kind, the place, the time, the quantity, and the quality. He must then select in the right proportion the materials, labor, plant, and machinery necessary for that product. He must purchase these factors in the market at the lowest price he can, unite them and sell the product to recover the expenses in the selling price. A thousand items enter into the cost and perhaps a single product emerges. What the business man thus pays out, expressed in money form, are the costs that are here to be considered. ”

“ But it permits price differentials 'which make only due allowance for differences in the cost of manufacture, sale, or delivery resulting from the differing methods or quantities' in which the commodities are sold or delivered. ”

“ If wages constituted the only cost which the entrepreneur must defray, the price of A ́ ́ ́ would be reduced to seven eighths of the former price, and this might, in the case of some goods, enlarge the demand to eight sevenths of its former amount and so keep all the labor in the general group. ”

“ Now it is said that we ought to buy of him and pay him a price 15 to 120 per cent. higher than we need pay the foreign manufacturer, even if he is a six-foot, bearded "infant," because the cost of production is necessarily higher here than anywhere else. ”

“ To-day, however, these contributions, which occur every year, are booked either to the general expenses account or the wages account—for they are, in fact, a part of wages—and they are naturally calculated as part of the cost of production, and eventually appear in the price of the goods, though perhaps not to the full extent in times of bad trade. ”

“ The amount of saving is partly determined by the cost of the articles consumed.It may also be remarked that the amount of an individual's expenditure is to some extent determined by the cost of the commodities which he consumes. The consumption of some articles diminishes in proportion to the rise which may take place in their price. ”

“ Some land is situated nearer, and some at a greater distance from, the market where the produce is sold. The farmers of the most distant land, if their produce is needed to meet the demand, must secure such a price as to cover their expenses of production, including the cost of carriage. The farmers of the nearer land, obtaining the same price for what costs less to convey to the market, have a surplus in hand, which competition for the enjoyment of their advantages compels them to transfer to the landlords as rent. ”

“ Much of their reasoning goes no farther than to explain one price in terms of other prices. If we attempt to explain the money price of a finished product in terms of the money prices of its raw materials and other money costs of prices of production, it is clear that we merely shift the problem. We have still to explain these antecedent prices. ”

“ Other things being the same, an increase of the money in circulation raises prices, a diminution lowers them. If more money is thrown into circulation than the quantity which can circulate at a value conformable to its cost of production, the value of money, so long as the excess lasts, will remain below the standard of cost of production, and general prices will be sustained above the natural rate. ”

“ We have seen that the larger the town the greater the velocity of circulation of bank deposits. § 11 XII.99 Throughout this book we have aimed at explaining the general purchasing power of money, not its purchasing power over any particular goods or class of goods. The problem of the rise in "the cost of living" is partly a general problem of the purchasing power of money, and partly a special problem of the prices of food, clothing and other costs of "living." ”

“ If the demand for dollars increases faster than the number of dollars—as it did after 1800—the price of each dollar will rise and prices generally will fall. The relative value of the dollar may be changed by natural causes or by legislation. An increased supply—the demand remaining the same—or a decreased demand—the supply remaining the same—will reduce the exchangeable value of each dollar. Natural causes may act on both supply and demand; as, for instance, by increasing the product from the mines or by increasing the amount consumed in the arts. ”

“ Neither utility nor costs nor supply and demand furnishes an adequate basis from which the quantity theory, or any other theory of the value of money can be deduced. The cost theory, and the supply and demand theory, in their present-day formulation, are really not theories of value at all, but are theories of prices, theories which presuppose value, and money, and a fixed value of money. ”

“ Of the three possible varieties in the influence of cheapness on demand, which is the more probable—that the demand would be increased more than the cheapness, as much as the cheapness, or less than the cheapness? This depends on the nature of the particular commodity, and on the tastes of purchasers. When the commodity is one in general request, and the fall of its price brings it within reach of a much larger class of incomes than before, the demand is often increased in a greater ratio than the fall of price, and a larger sum of money is on the whole expended in the article. ”