Price Formation - A Major Aspect of Economic Management

Abstract

Price formation is one of the important aspects of economic management. In the last few years broad measures have been enacted in order to improve wholesale prices in connection with the economic reform. Essentially, the reform demanded the creation of a new system of prices elaborated from the following principles: (a) the principle of bringing prices as close as possible to the level of socially necessary expenditures of labor, with due regard to the compensation of all normally operating enterprises for their production costs and their obtaining a profit that would assure as a minimum payments for productive capital and the creation of enterprise funds; and (b) the principle of establishing correct price relationships for substitutable products, assuring the stimulation of technical progress and optimal proportions in the development of individual branches of industrial production. Thus the system of prices must assure the cost-accounting functioning of enterprises under the new conditions, on the one hand, and must actively influence production on the other.