Each item has a base price. The enchantments and material of the item multiply or add to the base price to give the item an actual price.
Performing an action on an item costs an amount of money based on the actual price of the item. Each action has a different multiplier, which is used to determine how much that action will cost. Having the Merchant skill brings the price further into the character's favor by a factor of 2.
Items may also be enchanted. Some enchantments may increase the wearer's skills while others add extra protection or cause weapons to do more damage.