# market-price

## Definition

The market price is the actual price at which any commodity is commonly sold in the marketplace at a given time. It may be above, below, or exactly equal to the natural price, depending on the relationship between the quantity brought to market and the effectual demand for the commodity. Market price represents the real-time outcome of supply and demand forces in specific market conditions.

## Source Chapter

Book 1, Chapter 7: "OF THE NATURAL AND MARKET PRICE OF COMMODITIES."

## Context

Smith distinguishes market price from natural price as the observable, fluctuating price that results from the interaction of supply and demand. He explains how market prices deviate from natural prices due to temporary conditions like shortages, surpluses, or extraordinary demand, but tend to gravitate back toward natural prices over time.

## Economic Domain

Exchange

## Smith's Original Wording

"The actual price at which any commodity is commonly sold, is called its market price. It may either be above, or below, or exactly the same with its natural price."

## Modern Interpretation

Market price represents the dynamic, short-term price determined by current market conditions. Unlike the theoretical natural price, market price responds immediately to changes in supply and demand, creating the price fluctuations observed in actual markets. This concept forms the basis for modern microeconomic analysis of price determination.