International Price, Concept, Variety of Chains on the World...

International price

The concept

The international price (a special type of price in international trade) is the price of the main export or import transactions for Goth or other goods made on normal commercial terms in the main centers of international trade by well-known exporting firms and importers of the corresponding marketable products. Pricing in international trade depends on many factors:

• place and time of sale of goods;

• the relationship between the seller and the buyer;

• terms of the transaction;

• the nature of the commodity market;

• the source of price information;

• general market conditions of the goods;

• the general conjuncture and dynamics of the world economy.

The final price (value) of the goods is formed as a result of the action (and interaction) of the following factors:

• Manufacturer's price;

• cost of services;

• the cost of transportation services;

• the cost of legal support for the purchase and sale transaction

• the amount of payments to the budget (customs payments, taxes, etc.);

• cost of control over production;

• cost of services of intermediaries that organize the import of marketable products.

Variety of chains in the world market

In the world market, there are a great many prices for the same goods produced by different firms in different countries or even by the same firms selling their products (or their substitutes) in different countries or different cities of the same country . The spread of prices is largely determined by the diversity of international trade relations, differences in production factors in the production of the same goods in different countries, different regions of the country, as well as by other factors that contribute to the increase/decrease in the price of goods, including political factors. Here we mean:

• differences in the structure of the market;

• tax, budget, customs policy;

• differences in mobility (ability to move) resources between countries;

• diversity and multiplicity of markets;

• increase in prices when exporting products;

• the existence of significant discrepancies in the practice of fixing fixed and changing prices;

• differences in strategies for companies to compete in foreign markets.

It should be noted that the world market is a much more complicated phenomenon than any national market. He, in particular, is characterized by a more intense competition and specific forms of state intervention. Each country has laws that affect price formation and price movements in different ways. Here it is necessary to take into account the costs of studying the conjuncture of the world market for a particular product (and its substitutes), the promotion of the product to the market, etc. This is the so-called transactional, or marketing, costs.

Price Types

For the purpose of taking into account and analyzing the situation on the world market, types of prices are regularly published:

• reference prices ( requested prices prices that are lower when sold);

• prices of foreign trade statistics (reflecting the transactions performed and the dynamics of foreign trade prices);

• prices of exchange quotations (fix transactions with corresponding prices);

• prices of actual transactions and contracts (most fully reflect market prices for specific types of goods).

Price Determination Methods

In the practice of foreign trade, usually use two methods of determining the price:

1) the total production costs are calculated and a percentage mark-up is added to the total amount received, in the form of the profit that a firm expects to receive;

2) the use of marginal costs is expected; in this case, only those costs that are directly related to the production of goods entering the external market are taken into account.

Two price groups. World prices are divided into two large groups:

1) prices for manufactured products - these prices are formed on the basis of export prices of large firms with a general orientation to domestic prices;

2) commodity prices - in their determination, the main role is played by the supply-demand ratio in world markets and the prices of large countries exporting or importing raw materials. For commodities, the world's main chains are the chains of the main producers of these goods and the prices of Western European markets. For example, prices of large exchanges and auctions (in particular, prices of non-ferrous metals - stock quotes of the London Stock Exchange of non-ferrous metals) are practically world prices for the corresponding products or prices of OPEC (through the definition of quotas) - world oil prices.

Single Price Law

The law of a single ( world ) price is based on the assumption that in specific markets in the absence of transportation costs and official trade barriers (duties) goods must be sold in different countries at the same price, expressed in the same currency. The formula for a single price is as follows:

where P i - the dollar price of the commodity i when it is sold in the US; Pi a - the corresponding price of the product in euros.

As you can see, the law of a single price assumes that the dollar price of the commodity i will be the same, wherever it is sold in the world.

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