Before going for difference, let us understand the meaning of price, value and cost in simple words
Price is what you pay
Cost is what you expend
Value is what you get
There is confusion between words price, cost and value. Many people think all the threewords are more or less same but there is some difference between them. Before going for differences lets we try to understand the overview of these three words
In commercial terms, price is the amount charged by the seller from the buyer in exchange for any product/service. Price includes both cost and profit. When commercial transaction is good then it is called price, when subject matter is service, then it can be
Sometimes price generates revenue and sometimes price adds to cost of production. Price is also considered as the amount given in return of goods or service acquired by the buyer.
Cost is the amount spent on inputs with the aim of producing product/supplying services. Inputs can be land, capital, material, capital etc. in other words or simply words, cost in the financial worth of sacrifice made to get goods/services. Benefits obtained can be present or in future. Elements of costs are material, overheads and labor. Costs are divided into
Fixed cost − remains same irrespective of units produced (rent insurance, deprecation etc.)
Variable cost − not same or varies with units produced (labor, raw material etc.)
It is a benefit derived from product/service by customers. Value is decided on the basis of benefits received in terms of features, specifications, etc. in the marketplace. Features include functional characteristics, technical support, customer support etc.
The major differences between price, value and cost are as follows −
Price | Value | Cost |
---|---|---|
Amount paid for product/service. | Amount spent on producing/maintaining a product. | Utility of a good/service. |
Ascertained from the consumer's view. | Ascertained from the producer's view. | Ascertained from the user's view. |
Estimated through policy. | Estimated through fact. | Estimated through opinion. |
Increase/decrease in product price depends on market variations. | Rise/fall of cost depends on market variations. | Value remains constant. |
It is calculated in terms of money. | It is calculated in terms of monetary terms. | It is calculated in terms of money. |