How is price of a commodity different from its value?
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Answer:
Price can be understood as the money or amount to be paid, to get something. And value implies the utility of worth of the commodity of service for an individual. Price is the amount of money paid by the buyer to the seller in exchange for any product and service. The amount charged by the seller for a product is known as its price, which includes cost and the profit margin. For example- If you buy a product for $250, then it is the price of that product. And Value is the usefulness of any product to a customer. It can never be determined n terms of money and varies from customer to customer. For example- If you are going to a gym by spending 1000 bucks a month, the output seen is worth the expense, then it is the value that you create for a gym, regarding the service being offered there. Here the worth is its value.
This can be explained easily with an excellent example about water and diamond. Water is much essential for us to survive still it is of low price, while the diamond is just used for ornamentation and nobody dies without it, is priced very high. The reason behind this is its value, as the value of water is much for us, it is available at a low price, while the value of a diamond is less for us. Therefore, it is priced very high.
Stock market analysts make a lot of money sorting out the facts and figures along with the possibilities for success or failure. In the end, stock market analysts will arrive at a value, that is, what they believe the stock should trade for on the market. Often, the stock’s price is at or near that value, discounting daily fluctuations due to a rising or falling demand. However, there are many occasions where a stock’s price (what it is trading for on the open market) is way off the value. The amount a stock sells for (or indeed the price of anything) is merely the number that a willing seller and a ready buyer reach that is agreeable to each party. In other words, a stock (anything sold in a free market) is worth what someone is willing to pay. While the fundamentals influence stock prices over the long term, supply and demand rule stock prices in the short time. More buyers than sellers mean the price will rise, and more sellers than buyers say the price will fall.
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