Distinguish between Market price and Normal price.

Here we understand the Difference between Market price and Normal price in economic point of view in detailed.

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Distinguish Between Market price and Normal price

Now we will Analyse the Market price and Normal price one by one as follows:

Market price is determined by forces of demand and supply at a given time. Demand factor is predominant as supply is fixed. The normal price on the other side indicates an equilibrium when the conditions of supply have just adjusted fully to the change in demand.
Normal price is considered as an imaginary equilibrium price to which the market price tends to approximate. In fact normal price never attained. Before it is attained some disturbance might push the market price up or down.
Market price is totally influenced by passing events or temporary factors, whereas normal price is determined by long run factors on the supply side.
The commodities whose supply is permanently fixed have only market price. They cannot have normal price, because they are incapable of being reproduced. Take the example the case of pictures of Michael Angelo. His pictures cannot be reproduced.

Their Marginal cost of production cannot be established. Therefore they have only market price and not normal price.

Figure:

Perfect Competition- Price Determination- Market Price and Normal Price.

Kinnari

Tech writer at NewsandStory