Cost, Price & Value: Differences

Millions of products and services are present in the market, which are different in many respects. Whenever we go to buy a product or a service, the first thing that comes to our mind  i.e. what is the price of the good or service? How much does it cost? What is its value for us?

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Cost is an expenditure to manufacture a product or a commodity, which will have a value i.e.  If I am manufacturing a watch, the cost of materials, labour, overheads etc., which are spent for producing the watch is its cost. If my expense of manufacturing such watch is Rs. 400.00 then its cost is Rs. 400.00.

Also Read: 7 Ways to Keep your Funds Ready Before Buying a House


It is a form of value which will include the cost of commodity plus additional reward to the manufacturer / seller

Assume that I have manufactured a watch and now I am putting it up for sale in the showcase and put a price tag of Rs. 600.00, then Rs. 600.00 its price. It is a value at which the seller wants to sell the commodity. The price depends on utility, durability, supply and demand related to commodity etc. In ordinary terms it’s a tag which the seller puts while selling or asks for while selling. It should however be kept in mind that he may or may not get the price asked for.


Value is an estimate of the price that ought to be. While price is a fact, value is not necessarily the price of a commodity.

Fair Market Value:

Fair market value is a price that a willing buyer would pay to a willing seller for a commodity.

If you relate the same with the above example the watch’s cost is Rs. 400.00 and the owner of the shop put a price tag of Rs. 600.00. However, when you go to the shop and bargain and negotiate with the shopkeeper arguing that such watches are available in the market at Rs. 400.00 or Rs. 450.00 and at the end of bargaining you mutually agree at Rs. 500.00, than Rs. 500.00 is its value.

Also Read: What is Operation & Maintenance Cost of House?






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