What is Price?
This is a subject I have personally been debating about with people. For some odd reason, people always think something is worth more than the actual value of the underlying item. Their house is always worth more because blah blah blah. Their car is worth more because blah blah blah. Same old same old. This led me to challenge myself with a simple (yet difficult) question.
What is price?
Well, the price of something is determined between two parties – sellers and buyers. One of the two parties will initiate with a number, that will be followed up by the other party with agreement or negotiation. And through this process, a price would be established by which the transaction will take place. In our normal mindset, we tend to believe only the seller makes the price and in some cases, a buyer meets the seller’s price and a transaction is made quick and easy. Yet there is some that will always overprice something that just isn’t worth it.
Now I want to run an example in this post.
Let’s say I have a house for sale. 2 bedrooms, 1 bathroom Apartment in Pretoria East, Gauteng. And I am asking R5’000’000 for this Apartment, is that fair?
Yes, it’s totally fair. Will I sell it for that ridiculous price?
Probably Not, because the market determines that it’s only worth roughly R1’000’000.
Something is only worth what the next person will pay for it.