The word 价廉物美 is formed by combining two two-character phrases: 价廉, meaning 'inexpensive' (价 for price, 廉 for cheap), and 物美, meaning 'good quality' (物 for thing, 美 for beautiful). These phrases are joined in a parallel structure where each part consists of a noun followed by an adjective, resulting in a compound that conveys the idea of something being both low-cost and high-quality.