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Price Formation And Balance Relationships

  • Sh. Turetskii
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    Changes in enterprise cost of production influence only the profitability and finances of the individual enterprise. Changes in wholesale prices, on the other hand, are reflected in the economics of production, in finances, and in the profitability of many enterprises and branches acquiring or selling products for the new prices. When wholesale prices are raised, there is an increase in the proceeds (and hence in profitability) of the manufacturing enterprises and a corresponding increase in the outlays of customer-enterprises. As a result of a "chain reaction," price changes affect the economics of all stages of production all the way down to the manufacture of the final product. The total increase or decrease in proceeds resulting from price changes on products sold equals the total reduction or increase in outlays entailed in the acquisition (purchases) of these products. Such a monetary balance equality determines the essential relationships in the national economy and reveals the basis interrelations among branches and enterprises. This equality is the result of the nonuniform dynamics of outlays, and in an economic sense reflects the unity of outlays and proceeds that is manifested in distributive and redistributive relations in the case of planned changes in price.

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    Article provided by M.E. Sharpe, Inc. in its journal Problems of Economic Transition.

    Volume (Year): 13 (1970)
    Issue (Month): 4 (August)
    Pages: 21-35

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    Handle: RePEc:mes:prectr:v:13:y:1970:i:4:p:21-35
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