Asset Price

Asset Price

The amount one pays for an asset when buying it. The price represents the amount of value the market has assigned, fairly or unfairly, to an asset. Normally, prices are expressed in terms of money, but this is not always the case; for example, one may trade four chickens for two sheep.

Asset prices tend to be regulated by the law of supply and demand; that is, the price of an asset increases with smaller supply and/or greater demand. A corollary to this is the idea that commoditization drives prices down because it increases supply (sometimes vastly) while leaving demand the same. Prices likewise rise when the value of money declines. Governments can and have controlled the prices of certain assets by subsidy or decree. This is usually an anti-inflationary measure and tends to distort, rather than eliminate, the law of supply and demand. It is thus not generally sustainable as a mechanism for controlling price.