market price

The prevailing price at which merchandise, securities, or commodities are sold.

The actual price paid in a market transaction. Contrast with Market Value.
Example: A home was offered for sale at $100,000. It was appraised for $93,000, and actually sold for $95,000 in an Arm's Length Transaction. The market price is $95,000.

1. Price at which the seller and the buyer agree to trade on the open market.

2. In Transfer Pricing, best transfer price (i.e., the price that will maximize the profits of the company as a whole), under the following conditions: (1) a competitive market price exists; and (2) divisions are independent of each other. If divisions are free to buy and sell outside the company, the use of market prices preserves divisional autonomy and leads divisions to act in a manner that maximizes the profits of the company as a whole.

"established by public sales or sales in the way of ordinary business," 171 N.E. 2d 207, 213; "figure fixed by sales in ordinary business transactions, established when other property of the same kind and in the same or comparable location has been bought or sold in so many instances that such value may reasonably be inferred," 120 A. 2d 77, 80. This price is based on a theoretical transaction between a free seller and buyer dealing at arm's length. 367 F. 2d 104, 110. This term is synonymous with actual valuation, actual value, market value, and fair value. In determining a buyer's damages for nondelivery or repudiation of goods, "market price is determined as of the place for tender or, in cases of rejection after arrival or revocation of acceptance, as of the place of arrival." U.C.C. §2-713(2).

Market price is an economic concept with commonplace familiarity. It is the price that a good or service is offered at, or will fetch, in the marketplace. It is of interest mainly in the study of microeconomics. Market value and market price are equal only under conditions of market efficiency, equilibrium, and rational expectations.

Other measures of value

Market price is just one of a number of ways of establishing the monetary value of a good or a transaction. Others include historical cost, the resource cost of the good or service, an appraised value (such as the discounted present value), economic value, intrinsic value, and others. The manner in which the stock market price is presented is by market quoting. This is used for technical analysis of stock markets. Stock quoting is an important feature in market prices. It is important to differentiate between market price and carrying value. Carrying value it is the value of the issued shares on the companies financial statements.

Classical economics

Main article: Supply and demand

Many second order factors bear on market price in practice, not least the availability of market information to suppliers and potential purchasers.

In classical economics, the market price of a good or service is established in relation with demand, and in inverse relation with supply, which is to say the market price decreases as supply increases, increases as supply decreases, increases as demand increases, and decreases as demand decreases. The actual market price will establish a particular price point, valid for a short period which is the meshing of current demand and supply.

External links

• Market price definition and examples given in clear terms

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