In Marxist terms the price of production is where, in developed economies, the actual market price of a given commodity fluctuates from. This is determined by the Cost price plus the average Rate of profit multiplied by the cost price. To put mathematically if cost price is " C " , the average rate of profit is " P' ", and the Price of Production is " X ", then the equation to determine price of production is as follows:
C+(P' * C) = X
For a more concrete example let's say C = 200 and P' = 50% or .5.
200+(.5200)=X .5200=100 200+100=X 300=X
The price of production of this commodity is 300. This means that 300 is where supply and demand will fluctuate from in a developed economy.
(Note developed economy in this case refers to higher stages of capitalism. Early capitalism has what is called simple commodity production. In this stage instead of being sold around Prices of Production things are sold around the value of a given commodity.)