The Economics of the Just Price - Essay Example

Economics of the Just Price The concept of just of fair price has been adopted with the aim of combating unfair business practices such as predatory pricing, price discrimination and many others within economic systems. This is mostly achieved through the introduction of legal measures for controlling the pricing system within an economic setting. Unfair pricing practices are common in economic systems since mediaeval times and have necessitated adoption of fair pricing concept (Shirvani, 2014).

The major challenge presented by the concept is determining what constitutes a fair price as these are terminologies that are relative to the parties adopting them. The aspect of determining price fairness has raised questions since the concept was conceived and has been an element of discussion. An economic solution was developed to determine the constituents of fair prices in accordance to some conditions that must be satisfied. These factors are the clear definition of production factors. The presence of perfect competition within the market and the absence of market failures as a result of economies of scale.

When these parameters are considered the prices of commodities with only be affected by eh production costs and profits desired; and hence will be fair to both consumer and producer. This determination of the conditions that define fair prices has aided in the understanding of the elements that can be used to determine a fair price. In the ancient times, there were various factors that caused difficulties in determining a fair price and they were summed by the element of capitalism which was characterised by a lack of proper prices for labour, widespread aversion to payment of loans, and failure to incorporate interest payments into production costs.

Although prices have gained popularity and many production factors are now considered in pricing, the concept of fair pricing is still governed by restrictive conditions that render the concept difficult to apply in routine transactions. References Shirvani, H. (2014). The Economics of the Just Price. Retrieved December 6, 2015, from http://blogs.stthom.edu/cameron/the-economics-of-the-just-price/