Distinctions/Difference
Between Market Price and Normal Price:
The main
points of distinction/difference between market price and normal price
are as follows:
(1)
Market price is the price which prevails in the market at, any particular moment
due to the temporary equilibrium of the forces of demand and supply. The normal
price on the other hand, is the price which tends to prevail in the market in
the long run. it is the result of long run equilibrium between demand and
supply.
(2)
Market price is the result of temporary causes and passing events which
influences demand and supply or both; whereas normal price is affected by
persistent and permanent causes in the long run. The market price oscillates
round the normal price.
(3)
Market price is the actual price which prevails in the market at any particular
moment but this is not the case with the normal price. The normal price in
actual practice seldom prevails in the market, because in the long run a change
takes place either in demand or in supply conditions. In fact, the long run
normal price like tomorrow
never
comes.
(4) In
the very short period, the cost of production has no effect on market price but
in the long run, the normal price must be equal to both the marginal cost and
the minimum average cost.
(5) All
kinds of commodities have a market price but the normal price will be of those
commodities which are reproducible. For instance, unique, diamonds or some old
manuscript cannot be reproduced even if their demand rises. The supply will
remain fixed. So we cannot measure their normal price.
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