Market Price Vs Normal Price

 In very short time, the price determined, it is called market price. Market price is that price which prevails in the market at a certain time. 

Determination of market price 

Market price is the price at certain market time. For example, today, tomato per kg price is Rs. 50. This is current market price which determined in very short period. We can not increase its supply because production of tomato in farm needs of time. So, demand of tomato will effect on it instead supply. We can determined the price of two types of goods in short period

1. Perishable goods

Perishable goods are those which can dead fastly like milk, veg. and fruits. We can not increase its supply. We can only right to change the price as per demand. More demand, high price. Who have the money can buy it. Less demand, every poor person can buy. 

2. Durable Goods

Durable goods are those which we can keep upto 1 year like wheat, oil and rice. Price is determined at reserve price. Firm will not sell less than this. If price will fall than this price, firm owner will store it his store. In short period, we can change the supply as per demand only for durable goods but after a limit when there is no change of supply, demand effects on the price. If demand more, price will more. If demand less price will less.

Normal Price 

In long run, normal price will determined. Normal price will be determined where demanded quantity and supplied quantity will equal. In long run, body supply and demand can adjusted. If demand is more, new firms in the industry will enter and it will increase competition and price will decrease due to this and only normal price can be given by customer.