value in actuality , which is the case with the economic model above . Nevertheless , this all needs to be translated into a monetary expression , namely the monetary rate of profit and / or prices of production . So revisiting the simple reproduction model above , three more columns can be added to indicate prices of production , the monetary rate of profit and the value rate of profit . The value rate of profit is calculated by adding the constant capital and variable capital for each individual department and multiplying this by each of their individual rates of profit , i . e . ( C + V ) multiplied by IRP ( Individual Rate of Profit ), which for department 1 is 16.666 % and for department 2 is 75 %. The value rate of profit for department 1 is equivalent to its initial surplus value price , i . e ., 1000 units of surplus capital-value ; and the value rate of profit for department 2 is as well equivalent to its initial surplus-value price , i . e ., 3000 units of surplus capital-value . Again , price and value equate for both departments , akin to what Marx suggests should be the case .
On the other hand , the monetary rate of profit is calculated by adding constant and variable capital for each individual department and multiplying this by the general rate of profit , i . e .( C + V ) multiplied by GRP ( General Rate of Profit ), which in this case is 40 %. The calculation for department 1 is 6000 units of total capital-value multiplied by 40 % giving a monetary rate of profit of 2400 units of profit-value . The calculation for department 2 is 4000 units of total capital-value multiplied by 40 %, giving a monetary rate of profit of 1600 units of profit-value . And akin to the value rate of profit for department 1 and department 2 , the monetary rate of profit for department 1 and department 2 combined is 4000 units of profit-value and / or surplus money .
Following suit , the price of production , as per the definition outlined above , is the cost of production plus average profit expressed in monetary terms , i . e . the monetary rate of profit . So for department 1 the price of production equals 6000 units of total capital-value plus the monetary rate of profit for this specific department , i . e ., 2400 units of profit-value , the result is a price of production that equals 8400 units , reflecting the production-cost plus the average profit . Similarly , for department 2 , the price of production equals 4000 units of total capital-value plus the monetary rate of profit for this specific department , i . e ., 1600 units of profit-value , the result is a price of production that equals 5600 units , which reflects the production-cost plus the average profit .
Constant + Variable + Surplus Value = Total Value | C + V | S / V | P = S / C + V | Value Rate of P | Monetary Rate of P | Price of Production a ) Department 1 | 4000 | 2000 | 1000 | 7000 | 6000 | 50 % | 16.666 % | 1000 | 2400 | 8400 | b ) Department 2 | 3000 | 1000 | 3000 | 7000 | 4000 | 300 % | 75 % | 3000 | 1600 | 5600 | c ) Total Price | 7000 | 3000 | 4000 | 14000 | 10000 | 133 % | 40 % | 4000 | 4000 | 14000 ______ |
All in all , with this last and final addition of columns , one can see Marx ’ s self-enclosed economic value / price apparatus in full bloom and in full operation , where Marx ’ s fundamental equalities nicely equate with one another in the sense that total value equals total price , i . e . total prices of production equals total value , namely 14000 . The rate of profit articulated in value equals the rate of profit articulated in money , namely 4000 , and finally the total profit of the economic model equals the total surplus value of the economic model , namely 4000 . Albeit , of course , this whole simple reproduction economic model is predicated on the basic assumptions that value is scientifically quantifiable , value is solely the product of labor-power , and that exact sums of scientifically quantifiable value are the fundamental sources for price determinations , price being , for Marx , the monetary expression of value etc .[ 44 ]
Even so , the importance of prices of production in Marx ’ s economic model is that prices of production , i . e ., the average market price of a set of specific commodities , pertaining to specific spheres of production , provide a relatively stable marker , free of the fluctuations of supply and demand , by which market prices revolve and tend to reflect . Only the law of socially necessary labor-time influences prices of production in the sense that “ value at any given time is measured by the labor socially necessary to produce them ”[ 45 ]. According to Marx ,