What is an economic price?

The seller must also evaluate factors to identify the economic price that will serve as the selling price.

An economy price is a price that includes all expenses associated with the purchase. Sometimes known as a total price, this form of sales price will allow for any and all direct costs associated with the transaction, while taking into account any indirect costs that may apply. To some extent, the economic price will also include consideration of any opportunity costs that the buyer and seller may incur as a result of choosing to complete the proposed transaction.

It is important to understand all the factors involved before determining the selling price which also represents the economic price. For the buyer, this means having a clear understanding of what kind of expenses are associated with the purchase and deciding which of those expenses are bundled into that price. While direct expenses are usually obvious, some additional effort may be needed to identify hidden costs as well as direct costs that have some bearing on the purchase price. By being aware of these factors, in addition to considering what the buyer must give up in order to make the purchase, it is easier to decide whether the transaction is in that buyer’s best interest.

The seller must also evaluate each of these factors to identify the economic price that will serve as the selling price. This includes allowing for direct and indirect costs incurred as part of the process of selling the good or service, as well as providing customer support once the purchase is complete. Here, the opportunity cost factor is also important for the seller, as he must decide whether the opportunities that must be missed in order to do business with a particular customer are really worth the effort in both the short and long term.

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Understanding all the considerations that go into an economical price is important for everyone involved. This makes it easier to identify the potential benefits and liabilities of completing the transaction and ultimately decide which course of action is the most advantageous path. In some cases, accurately assessing the economic price and the reasons underlying that price opens the door to negotiation between a buyer and a seller, with the possibility of arriving at an alternative price that still serves the purposes of both parties. Unless both parties perceive the transaction as beneficial, it is likely that one or both parties will move forward and pursue other opportunities with greater potential to produce the desired results.

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