Price and cost

In the simplest form, we can describe both price and cost with this equation.

Price = Cost + Profit

However, this equation isn't exactly accurate. It shows that the price is somehow correlated to the cost, which isn't true in some cases. Regardless whether you watching Avatar with a 200+ million budget or The Blair Witch Project filmed with just 22,000, you are going to be paying the same ticket price at the cinema. Here, the price is uncorrelated to the cost.

Price is actually a function of supply and demand. But, cost will in one way or another determine the lower bound for the price. If you want to know more about the relationship between price and cost, check out this post from Chris Dixon.