To optimize the operation of power system， it is necessary to establish security constrained economic dispatch（SCED） and introduce locational marginal pricing（LMP） method. Economics and security are very important under electricity deregulation， SCED can integrate these two objectives effectively， it ensure the optimal and reliable operation of power system， and it also is the basis of most established power markets. Nodal price is a good solution of cross-subsidiary; it can reflect the actual electricity supply cost in space and time scale， and is implemented in more and more areas. This paper firstly illustrates the model of SCED and LMP， and how the LMP-based market could optimize the economic efficiency; then introduces the DC-flow method of LMP model， and makes it clear by an example. Finally， the paper points out that nodal price is very hard to understand， and it is counter-institutive in many aspects. However， nodal price itself is a well-designed mechanism. Power system operation should meet both the economic and reliability requirements， and this is why nodal price can be imagined easily.