Retail Prices

the prices at which goods and services are sold to the public and to other consumers. By influencing demand in conformity with a plan, retail prices stimulate the production of goods under socialism and operate as one of the factors that raise the level of the real income of the working people.

In the USSR most consumer goods and services are sold at fixed state retail prices. A small portion of the agricultural output is sold at prices set on the kolkhoz market under the influence of supply and demand or at the commission trade prices set by the consumer cooperatives according to agreements with the producers.

State retail prices are set on the basis of socially necessary labor expenditures for producing and selling goods. The principal elements of retail prices are outlays for the production and distribution of goods and the profit of the production enterprises and commodity-marketing organizations. Prices for alcoholic beverages, tobacco products, and certain other commodities also include a turnover tax.

The overall level of retail prices and changes in that level are determined by the Council of Ministers of the USSR. Prices for new types of goods and services are set by the state price formation bodies, in terms of the existing level of retail prices for similar goods and services, taking into consideration differences in their quality and consumer appeal. The prices of new, basic nonfood commodities are set at a uniform level for the entire country. There are zonal variations in the prices of new, basic foodstuffs, furniture, glass, gasoline, and lumber. For certain types of goods and services, the retail prices are set by republic and local price formation bodies. If unjustified price differences emerge, they are eliminated by the State Price Committee of the Council of Ministers of the USSR, which coordinates retail prices. Seasonal prices are established for certain agricultural goods, such as potatoes and vegetables. Obsolete styles and models of consumer goods, as well as goods that have declined in auality—for example, as a result of prolonged storage—are sola at reduced prices. Retail prices are set in price lists.

The retail price policy of the Soviet state is subordinate to the interests of developing the socialist economy and raising the standard of living of the working people. From 1947 to 1954 the state retail prices for consumer goods declined annually. In recent years the Soviet state has pursued a planned policy of stable state retail prices. The prices of certain types of goods have been reduced as commodity resources have accumulated, owing to a continuous increase in the monetary income of the population from wages and social consumption funds (see Table 1).

The other socialist countries follow the same general principles of retail price formation and dynamics, but in each country

the organization and methods of price planning also have specific features. The collective experience of the Council for Mutual Economic Assistance (COMECON) makes it possible to work out measures to increase the similarities among the domestic price formation methods of the socialist countries.

Under capitalism retail prices are subject to spontaneous fluctuations, depending on market conditions and on the ratio of supply to demand. Under state-monopoly capitalism retail prices are used as an instrument for redistributing national income in favor of the monopolies. There are several types of retail prices. Prices set by the state cover a limited range of goods. Fixed and recommended prices, the level of which is set by the industrial monopolies, are an important means by which the monopolies control the marketing of mass-produced goods. They are, as a rule, monopoly prices that ensure monopoly profits. In a free pricing system, prices are set according to the balance of supply and demand. The structure of these prices includes the wholesale price paid by the retail trade enterprises to the wholesale firms, plus the trade markup.

Since the end of the 1960’s there has been an inflationary increase in retail prices in the capitalist countries. This trend, which has grown stronger in the 1970’s, has had a negative effect on the real income of the working people. Between 1950 and 1974 the consumer price index rose by 105 percent in the USA, 230 percent in Great Britain, 250 percent in France, and 304 percent in Japan. Most of the increase took place in the 1970’s.