Difference between Price, Cost and Value

Definition of Price:
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 Rs 250, then it is the price of that product.

Definition of Cost:
Cost is the amount incurred on the inputs like land, labour, capital, enterprise, etc. for producing any product. It is the amount of money spent by the company in the manufacturing of a product. For example- If a company manufactures shoes, then the expenses incurred on raw materials, salaries, rent, interest, taxes, duties, etc. determines the cost of the product.

Definition of Value:
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.

Differences between Price, Cost and Value:

Price	Cost	Value
Price is what you pay for goods or services you acquire	Cost is the amount of inputs incurred in producing a product	Value is what goods or services pay you i.e. worth
Price is calculated in numerical terms	Cost is also calculated in numerical terms	Value can never be calculated in numbers
Price is same for all the customers	Cost is also same for all the customers	Value varies from customer to customer
Price is estimated through the price policy	Cost is assessed on actual expenditure incurred on manufacturing a particular product	The estimation of value is based on customer’s opinion.
The Ups and downs in the market will affect the price of any product	The Ups and downs in the market will affect the cost of any product	Value remains unaffected
The ascertainment of price is done with the view of the consumer	The cost is ascertained from producer’s view	The ascertainment of value is done from the user’s point of view

Examples For Differentiation:

Price Vs Cost:

If you purchase a brand new Car, then the amount you pay to the car seller for its acquisition is its Price while the amount invested in manufacturing the car is its Cost. Normally, the price of any goods or services is more than its cost because the price includes the profit margin.

Cost Vs Value

If you are a watch manufacturer and produce millions of watch on a daily basis, then the cost of production is your prior concern and not the value of the product. You may try to achieve the economies of scale i.e. more production at less cost. Whereas in the case of the customer, the purpose for which the watch is purchased must be fulfilled irrespective of the cost incurred in its production. A customer must feel the worth of purchasing the watch in terms of its price.

Value Vs Price

This can be explained easily with the popular example given by Prof. Adam Smith about water and diamond. Water is much important 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.

In simple words, Price is the money paid to the seller; Cost is the amount of inputs involved in the manufacturing of product and value is what product or service pay to the customer.