4. Price is transient.
Price is not something permanent attached to an object to denote its value. It is what is paid in a transaction, and its level it set at the point at which the transaction takes place. Price varies from place to place, even for identical objects. The cup of tea at the top of Ben Nevis will generally command a higher price than a similar cup of tea at the base of the mountain, and both will probably be higher than that of a cup of tea at a city corner-shop café. Price changes over time, too, and the same object might command a lower price at some times of the year as opposed to others.
In some circumstances price may vary according to the person involved, with some being charged more than others. In large parts of the world the transaction price is struck at the end of a spell of bargaining, with its level depending in some degree on the skill of the bargainer. In some tourist economies visitors are charged higher prices than local residents.
Economies are constantly in motion as transactions are completed and new ones begin. Price is part of that motion. While there might be some price stability over the medium term, it does fluctuate according to the relative supply and demand for particular commodities. Supply matches demand only fleetingly, because for most items both supply and demand are constantly changing variables as people alter their behaviour in response to changing conditions.
There is no such thing as a 'fair' price for a commodity. Some people will value an object more than other people, and be prepared to devote more of their resources to it. Although customers might object to high prices charged in times of scarcity, those high prices might well encourage others to increase the available supply. Although we speak loosely of the 'market price' for something, we do so knowing that this is something which varies with place and time.
Since the time of Hammurabi in ancient Babylon there have been attempts by government to fix prices, including wages, the price of labour. These attempts only suppress the information which changing prices convey, and distort the ability of supply and demand to respond to each other. Shortages and rationing are the usual result of such measures.
This is part of Dr Pirie's ongoing series: Philosophical Observations on Economics.
