Price vs. Cost

This is not going to be a lengthy Deep Dive, just a little philosophical earworm, meant to keep you thinking.

 A lot of people use the terms "Price" and "Cost" interchangeably, and to a point they do mean the same thing. Because most people are not taught a precise way to use the language, it's understandable to have this confusion. That being said, these two words have separate but related meanings.

"Price" in economic terms means the amount of Universal Value Units (money) you have to exchange to receive the goods and services you want and need. Price is "All About the Benjamin's."

"Cost" is more of a personal thing. This is about the time and effort one person must expend to accumulate the necessary capital to exchange.

The MSRP (Manufacturer's Suggested Retail Price) of a PS5 is $500. A man who makes $25/hour in his day job who buys his son one as a present will take about 20 hours (2.5 8-hour days) of work time to accumulate that amount of cash. If his son tries to buy it for himself with his $8/hour fast food job, it cost him over 60 hours of work time. Working a 20-hour week, that's three weeks of nothing else but "adding to the PS5 fund." No dates, no eating out with friends, no skate park, and so on. If the young man wants to date, eat with friends and so on, this will drastically extend his overall time spent before he gets the device. It will still take him 60 hours of work no matter what, but the total time before he can get it all depends on how many work hours in a week are devoted to that purchase.

Of course, the true numbers are not that straightforward. Sales taxes raise the purchase price and income taxes decrease the income stream. Other expenses (rent, food, etc.) will also interfere with the accumulation of this wealth. An emergency of some kind (hot water heater going out, flat tire, etc.) can also delay or prevent the purchase as well.

The overall point is while the "price" is the same for everybody, "Cost" varies from person to person, depending on their earning power and willingness to sacrifice to achieve their goal.

Just something to think about.

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