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A fixed price is a non-negotiable price that remains constant throughout a financial transaction, commonly used in contracts for goods and services. It differs from variable pricing, where prices can change due to circumstances. Fixed pricing allows for easier expense projection and budget planning, while cost-plus contracts allow for unforeseen costs to be passed on to the buyer. Fixed pricing is the standard in many retail settings, but haggling is still expected in some situations.
A fixed price is a price that is not open to negotiation, and will remain constant for the duration of a financial transaction. This non-trading process is common in many financial transactions and involves the issuance of a specific price that will remain the same, regardless of the type of circumstances that occur. Many companies offer a fixed price contract for various goods and services, effectively guaranteeing the same price for the duration of the contract.
The fixed price is different from the variable price. When there is room for negotiation, either by the buyer or the seller, the price is not considered fixed or fixed. Instead, circumstances may change and result in a change in the price paid by the consumer. A good example would be obtaining a fixed price for the delivery of raw materials for a manufacturing plant. In case events occur that increase the cost for the supplier of those raw materials, that additional cost cannot be passed on to the buyer, if the price has been fixed in a contractual situation.
Many individuals and businesses prefer a fixed rate contract for the simple reason that there is no guesswork when it comes to calculating the final cost of a good or service. When the price is set in the terms of the contract, the buyer can be sure that as long as he meets the terms and conditions of the contract, the rate will remain the same, even if the supplier’s cost increases at some point during the contract This can make it much easier to project expenses and participate in budget planning for periods of one year or even longer, depending on the duration specified in the contract.
A fixed price contract is different from a cost plus contract, where any change in the costs incurred by the supplier can alter the rate that the buyer owes. For example, if a painter uses a cost-plus contract format when arranging to paint a house, it is possible to charge more than the price stated in the contract if the cost of paint and other supplies exceeds the projections made by the painter once the contract was drawn up. This approach protects the supplier from absorbing unforeseen costs and effectively passes them on to the buyer.
The concept of the fixed price is considered the standard in many settings, especially retail settings. While fixed pricing is the norm in many parts of the world, there are still situations where haggling over the purchase price is not only considered appropriate, but expected. When this is the case, the buyer will seek to secure the lowest possible price and will complete the transaction before the seller changes his mind and attempts to secure a higher price.
Smart Asset.
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